How Many Deals do PE Firms Source on Axial Every Year? (Hint: 1,000s)
Private equity firms miss the majority of opportunities available in the market. According to Sutton’s annual Private Equity Deal Origination…
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Independent Sponsors continue to strengthen their position in the lower middle market M&A landscape. Over the last 12 months, Independent Sponsors have accounted for 27% of closed deals on the Axial platform —the highest share of any buyer type —compared to 20% for Private Equity Funds.
Axial’s 2025 Independent Sponsor Report builds on findings from the 2023 survey and analysis to show how Independent Sponsors are evolving in sourcing, financing, and execution. Based on responses from 83 active sponsors, along with M&A advisor and Family Office feedback on their interactions with the segment, the report highlights key shifts over the past two years. Independent Sponsors are gaining greater acceptance in the market, strengthening capital relationships, and refining their sourcing strategies, even as competition, valuations, and execution challenges remain top concerns.
Deal Activity
Which channels do you use for deal origination? (Multi-select)
Similar to the 2023 survey, Independent Sponsors continue to emphasize the importance of leveraging multiple sourcing channels to identify attractive investment opportunities. Sell-Side Intermediaries rank as #1 with 93.8% utilization, representing a notable ~10% increase from 2023. Proprietary sourcing and Deal Networks follow closely, used by 82.5% and 77.8% of respondents, respectively, reflecting the continued value of a diversified origination strategy.
Which channels generate the best results for you and why?
The preferred channel for deal origination varies from one Independent Sponsor to another, often depending on firm strategy, sector focus, and stage of growth. The anecdotes below highlight some opinions of Independent Sponsors on their preferred channel.
| Axial Member + Firm | Channel | Reasoning |
|---|---|---|
| Al Cameron, Rox Capital | Deal Networks | Axial has been a great channel for us in the past several years. It's opened the doors to networks and deals that otherwise we may not have encountered. Through those deals and new networks, we've sourced additional add-ons as a result. |
| Andrew Kilpatrick, Markham Capital Partners | Direct To Owner | Direct proprietary deals yield the best results for us. Our differentiator is culture and values, which don't translate through an intermediary. |
| Luke Phenicie, Kissel Capital, LLC | Sell-Side Intermediaries | When you source deals via an intermediary, the seller is typically quite committed to a sale process, and the broker is motivated to get a deal done. |
| Dennis Huang, Polychrome | Direct To Owner | Proprietary outbound. Being able to build a relationship with a founder and have them see the value in our platform leads to better results |
| Thiago Brando, Sette Capital | Deal Networks | Networks with good scale will always work best as a means to discover deals, but competition can be tougher |
| Afshar Sanati, Clavis Capital Partners | Sell-Side Intermediaries | Investment banks show us the most relevant deal flow. The deals are vetted, and the information is organized. |
| Sam Hafermann Signal Rock Capital | Deal Networks + Sell-Side Intermediaries | Deal networks and brokered deals because the owner is ready to transact, and there is a certain level of quality inherent when a good banker is involved, and easier screening on platforms like Axial. |
| Ed Hine, Line 5 Capital | Sell-Side Intermediaries | The intermediary takes on the burden of seller education and preparation while acting as a trusted advisor for when things inevitably get challenging. |
| Kevin Kraft, Wisconsin River Partners | Direct To Owner | Proprietary is the slowest, but has the highest probability and best fit. |
| Ryan Sullivan, North Park Group | All Four Channels | It is mixed - we have had success with all of them. |
Challenges in Completing Transactions
Independent Sponsors face a range of headwinds when it comes to getting deals across the finish line. Many cite rising competition and inflated seller valuation expectations as persistent hurdles, while others struggle with inconsistent deal quality, limited bandwidth, and the challenge of breaking through the noise in proprietary outreach. The quotes below capture, in their own words, what’s making deal sourcing and execution most challenging today.
| Axial Member + Firm | Challenge |
|---|---|
| David Eshaghian, Panther Equity Group | Picking a business that will be AI-proof / relevant 10 years from now. |
| Ken Nguyen, Evolution Strategy Partners | Seller valuation expectations, increased competition, and getting the name out there. |
| Bob Ogdon, Dry Fly Capital | Always looking for the right fit. Being selective forces a lot of no-gos. The lower middle market falls between brokers and investment bankers. |
| Dennis Huang, Polychrome | Consistency and deal quality. How can I ensure that we continue to see the best deals out there that fit our criteria? |
| Chris Sheeren, Longhouse Partners | Finding healthy companies in an uncertain economy at reasonable valuations. |
| Jonathan Slonim, Ilion Capital Partners | Valuations are too high, and in our specific target industries, there are 20 low-quality assets for every one that we can potentially close on. |
| Richard Okon, AcquireEdge Partners | Connecting with motivated sellers directly. |
| Reginald Binford, Proviso Capital | The top challenge is the increase in competition from traditional middle market private equity going downstream and more players in the entrepreneurship through acquisition (ETA) space. |
| Charles Scripps, Black Lake Capital | Limited deal flow and poor business performance. |
| Adam Lerner, JACE Capital | Covering the landscape of relationships and carving out time and money for proprietary outreach. |
Financing Power: A Key Driver of Independent Sponsor Success
Independent Sponsors’ ability to demonstrate credible, committed financing remains central to winning deals in a competitive market. As Bob Ogdon of Dry Fly Capital notes, “There seems to be more acceptance of Independent Sponsors in the market. We lose some deals because of the fear of closing without a dedicated fund, but less so than in the past.” This growing confidence reflects an industry maturing in both reputation and execution, where proof of capital, often in the form of capital support letters or established financing relationships, has become essential to building trust and credibility with sellers and intermediaries.
Are you asked for capital support letters when negotiating a deal?
Across all three survey questions above, the 2025 data reflects a reduction in the frequency and reliance on capital support letters compared to 2023, suggesting a gradual normalization and growing confidence in Independent Sponsors’ credibility.
Fewer sponsors are being asked for capital support letters “very often” — down from 20.4% to just 8.8% — while “occasional” requests remained consistent, and the share of sponsors not asked at all rose from 26.5% to 38.8%. Similarly, the number of sponsors who occasionally provide capital support letters declined from 62.5% to 55%, and those who “almost always” provide them fell slightly as well.
The timing of when these letters are provided has also shifted. Fewer sponsors are providing them pre-IOI (13.6% → 5.4%) and pre-LOI (68.2% → 55.4%), while post-LOI execution has become more common (18.2% → 39.2%), signaling that support letters are now used more selectively and strategically later in the process. Collectively, these changes indicate an evolving landscape where Independent Sponsors face less pressure to preemptively prove funding, reflecting broader market acceptance and stronger capital relationships.
Equity, Debt, and Alignment in Deal Structuring
Who do you raise equity capital from? (Multi-select)
The Family Office Lens on Co-Investing with Independent Sponsors
Family Offices and High-Net-Worth Individuals remain the dominant equity partners for Independent Sponsors in 2025, with usage rising slightly to 85% and 81.3%, respectively. Their continued prominence reflects a strong preference for flexible, relationship-driven capital sources that align with the Independent Sponsor model.
To better understand the perception of Independent Sponsors, we asked a few Family Offices a handful of questions, multiple-choice and free-text, regarding co-investments. Insights below.
| Jason Allevato, Appalachian Capital | Tim White, White Brush Capital | Kevin Salquist, Big 7 Ventures | |
| Under what circumstances do you consider investing alongside an independent sponsor? | Sector expertise, deal size, alignment of interests, capacity, and rights/control provisions. | Sector expertise and deal size. | If the independent sponsor has expertise in an area that my firm doesn't. |
| Are you more likely to pursue co-investments with independent sponsors versus direct investment opportunities? | No, we prefer direct investment opportunities. | No, we prefer direct investment opportunities. | No, we prefer direct investment opportunities. |
| When deciding whether to co-invest with an independent sponsor, what factors most influence your decision? | Track record, deal terms, and level of sponsor capital at risk. | Deal terms and track record. | Track record, and experience and relationships in the industry. |
| What economics are most important in evaluating sponsor partnerships? | Management fees, carried interest, and deal structure. | Carried interest. | Deal-by-deal structure and carried interest. |
| How important is it for an independent sponsor to contribute meaningful capital to the deal alongside you? | Extremely important – a prerequisite for partnership. | Extremely important – a prerequisite for partnership. | Very important – strongly influences our decision. |
| Are there situations where you consider sponsors to be better co-investment partners than traditional PE firms or other family offices? | N/A - did not answer. | Yes, because they have more focus. | For us, it's a case by case situation. No two deals are the same. |
| What role does your family office prefer to play in the diligence and deal execution process when partnering with an independent sponsor? | Flexible – depends on the opportunity. | Active supporting role – collaborate closely with the sponsor. | Active supporting role – collaborate closely with the sponsor. |
| How has your viewpoint on independent sponsors changed in the past 12–24 months? | More favorable – increased confidence in sponsors. | Neutral – no major change in perspective. | Neutral – no major change in perspective. |
| How do you see your family office’s approach to independent sponsor partnerships evolving over the next 2–3 years? | We expect to increase our level of engagement with sponsors. | We expect to increase our level of engagement with sponsors. | Too early to tell / uncertain. |
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What type of debt do you use in acquisitions? (Multi-select)
In 2025, Traditional Senior Debt and Seller Note rank as the two most prevalent forms of acquisition financing, reflecting a preference for proven funding structures that offer both flexibility and reliability. Junior Debt usage declined significantly—from 81.3% in 2023 to 60.8%—indicating a more conservative approach to leverage amid higher interest rates. However, with the Fed’s recent signal toward falling interest rates, Independent Sponsors may soon find more favorable conditions for debt financing. SBA loans also fell to 29.7%, suggesting a modest shift away from government-backed lending options.
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What is the best instrument to align incentives/bridge valuation gaps with owners?
Short-term earnouts remain the top choice for bridging valuation gaps in 2025, though their usage declined from 43.8% in 2023 to 32.5%. The most notable shift came from management incentive pools, which increased from 6.3% to 18.2%, indicating growing interest in equity-based structures as a way to align interests between Independent Sponsors and business owners.
Standing Out in a Competitive Market
Independent Sponsors differentiate themselves in a crowded deal environment through a blend of industry expertise, operational experience, and relationship-driven approaches. Many emphasize their track record and ability to close, while others highlight firsthand operator experience, cultural alignment with sellers, and a long-term, partnership-oriented mindset. Whether it’s through sector specialization, creative structuring, or hands-on collaboration post-close, these sponsors consistently position themselves as credible, value-adding investors rather than purely financial buyers.
The insights below highlight the diverse ways Independent Sponsors set themselves apart when competing for deals.
How do you differentiate yourself when competing for deals?
| Member + Firm | Quote |
|---|---|
| Jonathan Slonim, Ilion Capital Partners | Industry expertise is the only real differentiator. A seller will know if you know their industry and can be trusted to grow their rollover equity. That said, most of our deals that we have closed came down to relationship capital. And most that have fallen apart were also because of spent relationship capital. |
| Al Cameron, Rox Capital | A track record is the strongest support for Rox Capital. The founders of the firm sat in operating roles of an SMB for several years, allowing them to connect with sellers on a personal level. Additionally, offering references of previous sellers who can speak to the Rox Capital as a whole, our process, and our people helps give sellers confidence. |
| Andrew Kilpatrick, Markham Capital Partners | We have run businesses for ourselves and others, so we have sat in the seller’s seat. This means something to most sellers. We also stress culture fit. Life is too short to fix broken culture in a business, so we select out more companies than select us out. |
| Sam Hafermann, Signal Rock Capital | Bespoke boots on the ground attention vs. a traditional PE fund; longer hold periods; ability to get more creative with financing. |
| Ryan Martin, Fairchild Capital Partners | Fairchild focuses on creating alignment with sellers and management teams to achieve mutually beneficial short-term and long-term objectives. |
| Dennis Huang, Polychrome | Our hands-on approach and our central services team. We want founders to stay on with the business post-close, and we partner very closely with them in the day-to-day of the business. We ultimately are a long-term hold company, and want to work alongside our founders to build lasting and sustainable businesses. |
| Megan Horvath, Tremont Growth Partners | Track record - my partner and I have closed nearly 50 deals at prior firms. |
| Jeffrey Solomon, Strike Capital Management | Aligned and strategic capital with strong operational capabilities. Typically, there is a 1+1=3 scenario that is tangible and understood amongst stakeholders. |
| David Eshaghian, Panther Equity Group | We make it about the business value creation day 1 and solving for what the business needs. This lands very well with Founders who care about their teams, legacy, and customers. We also always have 1-2 Operating Partners working with Panther with direct industry expertise on any deal we are working on. |
| Jasper Gallo, PRH | Our process, experience, and ability to develop creative solutions. |
Advisor Insights: Independent Sponsors in Today’s Market
To round out this year’s report, we surveyed a group of active Axial M&A advisors representing firms that typically work on transactions ranging from 5M to $100M in enterprise value. Nearly 74% of respondents reported closing two or more deals in the six months prior to the survey, reflecting an experienced and transaction-driven group. Their responses provide an informed view of how Independent Sponsors are perceived in today’s market, highlighting both the growing acceptance of the model and the continued importance of demonstrating credibility, experience, and capital certainty in competitive processes.
How frequently do you include Independent Sponsors in your buyer outreach?
| Axial Member + Firm | Frequency of Sponsors in Buyer Outreach | Reasoning |
| Paul Williams, Restoration Business Advisors | For every deal | We find that independent sponsors tend to have flexibility and are not constrained by the typical hold period that fund sponsors are. This tends to fit well with the sellers in our market. |
| Jay Nofi, SureBridge | Rarely | We mainly sell to Private Equity and Strategic Buyers, as well as micro PE. |
| Bill McDonald, McDonald Dalton Capital Partners | For most deals | We show every deal to Independent Sponsors unless the client takes them off the list. Some clients won't spend time on buyers who don't have funding in place. |
| James Hollander, Corporate Development Associates, Inc. | Never | Do not want to wait for capital to be secured. |
| Gareth Petsch, pH Partners | For most deals | When financial sponsors are included on the target list, I always include independent sponsors. |
| Wendy A. Andrews-Fine, Aberdeen Advisors, Inc. | For every deal | Over the past several years, the independent sponsor model has proven to be an effective and versatile approach to closing transactions. Many independent sponsors leverage deep industry expertise and extensive, well-capitalized networks, which enable them to successfully access investment capital and complete transactions across a broad range of enterprise value. |
| Manuel Amor Loureda, L40 | Rarely | We occasionally included independent sponsors on smaller deals in the past. As we’ve moved upmarket, however, our focus has shifted to investors with committed funds. |
| Michael Vann The Vann Group, LLC | For most deals | Our clients generally don't see any difference between an independent sponsor and PE, so if we are targeting financial buyers, they are in the mix. |
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What factors determine whether or not you perceive an Independent Sponsor to be a credible buyer in your process?
When it comes to credibility, M&A advisors emphasize that Independent Sponsors must demonstrate more than just interest—they need to prove execution capability. Advisors consistently point to factors such as having financing pre-sourced with a capital partner, asking thoughtful questions, and showing a track record of closed deals or sector experience. The insights below highlight what advisors view as the most telling indicators of a sponsor’s ability to perform and close successfully.
| Member + Firm | Quote |
|---|---|
| Joe Bieshelt, Venture North Group | The biggest factor in perceiving an independent sponsor as a credible buyer is the proof of a relationship with a group that has capital to support the acquisition. This is often proven by showing that the firm has closed previous acquisitions. |
| Daniel Emre, Axiom Acquisition | Asking the right questions, having financing sourced with a pre-approval letter, and demonstrating prior experience in the sector. |
| Matt Gilbert, Gilbert Interests | The enterprise value range is the primary factor in determining the likelihood that independent sponsors will be able to compete. In smaller deals, they can stand toe-to-toe with more established buyers. As transaction value moves up in price and complexity, the likelihood of independent sponsor success diminishes. |
| Paul Williams, Restoration Business Advisors | Looking at current and past investments. History of closing deals. Past relationships. Ability to prove strong financing and capital partnerships. |
| Gary D Rakan, Vesticor Advisors | Transaction history and relevance of existing or previous operating company experience. Is this transaction their maiden voyage? |
| Manuel Amor Loureda, L40 | For us, an independent sponsor is credible if they can show they already have equity partners lined up, have a strong track record in similar deals, and can move through a process without delays. At the end of the day, it comes down to the certainty of closing and whether they can really compete with established funds. |
Independent Sponsors v. PE Funds
How do Independent Sponsors compare to PE funds in terms of speed to close?
How do Independent Sponsors compare to PE funds in terms of deal pricing?
Compared to traditional Private Equity Funds, Independent Sponsors are widely perceived as taking longer to close, with nearly 73% of advisors citing extended timelines. This lag is often attributed to the need for sponsors to assemble deal-specific financing and secure equity commitments after signing a letter of intent, whereas PE funds benefit from readily available committed capital. However, this flexibility also enables Independent Sponsors to tailor capital structures to each deal, sometimes resulting in more competitive pricing.
On the pricing front, results were more balanced; 35% of advisors said Independent Sponsors and PE Funds typically bid similarly, while 29% noted that outcomes often depend on the sector. These findings suggest that while Independent Sponsors may take longer to close, their pricing discipline and sector-specific focus help them remain competitive in auctions and bilateral processes.
In what situations may an Independent Sponsor be a better buyer than a PE Fund?
Nearly half of the surveyed M&A advisors (47%) believe there are situations where an Independent Sponsor may be a better buyer fit than a traditional PE Fund. The insights below highlight when advisors believe Independent Sponsors bring unique value to the table, whether through sector expertise, hands-on engagement, or a more personal connection with sellers.
| Member + Firm | Quote |
|---|---|
| Bradley Smith, Vertess Healthcare | I have found that independent sponsors are more open to unique or complex situations, whereas traditional PE would shy away from |
| Matt Gilbert, Gilbert Interests | Independent sponsors can be a better buyer for certain sellers when they connect with the seller and build a great relationship - when this happens, we bend over backwards to help the deal get done, as it becomes clear it is in our client's best interest. |
| Joe Bieshelt, Venture North Group | If the IS has specific industry knowledge, it could create a better fit than a traditional PE. |
| Wendy A. Andrews-Fine Aberdeen Advisors | In certain situations, an independent sponsor may be a more suitable buyer, particularly for smaller-scale deals or those presenting complexities that traditional private equity firms may be unable to address due to their broader deal exposure and more rigid investment parameters. |
| Ray Johnson, Exit Experts | When the seller is looking to retire quickly, they want an independent sponsor to take over and run the company. |
| Warren L. Rose, Groce, Rose & Moore, LLC | Since independent sponsors attract capital from a diverse pool of investors, their investment criteria are broader, thus open to more opportunities. |
Final Thoughts
The 2025 data shows a continued rise in the credibility and maturity of the Independent Sponsor model. Sponsors are strengthening financing relationships, improving sourcing methods, and earning more trust from sellers and advisors. Family Offices and high-net-worth investors remain key partners, reinforcing the appeal of flexible, deal-by-deal investing.
Advisors increasingly view Independent Sponsors as credible buyers capable of competing with institutional funds. Their flexibility, operational focus, and tailored approach position them well for complex or founder-led deals. Those who execute well and build lasting relationships will define the next phase of Independent Sponsor success.
How Independent Sponsors use Axial
Deal Sourcing
The lower middle market is vast and highly fragmented, making it difficult for even the most disciplined Independent Sponsors to achieve complete deal coverage. As a result, sourcing remains one of the most persistent challenges for this segment.
Axial was built to address this challenge. By combining technology, data, and human coverage, the platform covers 40-50% of lower middle market deal flow, enabling Independent Sponsors to effectively source both platform and add-ons acquisitions from boutique sell-side intermediaries, opportunities they would otherwise miss.
Brand Credibility
Independent Sponsors can use the Axial platform to strengthen their market credibility, both as active dealmakers and as trusted counterparties. The recently released 2025 Top 20 Independent Sponsors on Axial ranking highlights the most active and effective sponsors on the platform, demonstrating how visibility and consistent activity can build recognition and trust among advisors, sellers, and capital partners.
Brand Awareness
Building brand awareness is another key advantage of being active on Axial. Generating over 1 million page views of targeted traffic each year, the Axial Directory is a critical digital destination for the lower middle market. As one of the top Google search results for “Independent Sponsors,” it serves as a centralized, publicly accessible resource showcasing active firms in the market. Maintaining a complete and up-to-date Axial profile helps Independent Sponsors improve visibility, enhance discoverability, and differentiate their brand in a competitive landscape.
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