We don't write fundless-sponsor checks ourselves. We build the data layer underneath the firms that do, which means the law-firm primaries and survey data are the parts of the deal we actually read end to end. So this post is what the McGuireWoods survey and the law-firm explainers say about sponsor economics, with the ranges sourced rather than waved at, and with the gaps in those sources named where they matter.
The law-firm explainers do a clean job on the legal scaffolding. They are noticeably quieter on the dollars. A would-be sponsor reading the top ten Google results comes away knowing what "Class P equity" means and almost nothing about whether the deal they have in mind pays them enough to keep going for two years before a sale.
So here is the cohort math, with the ranges sourced rather than waved at.
The three fees, with actual numbers attached
On a lower-middle-market deal (call it $5M to $75M of enterprise value, $1M to $10M of EBITDA, which is roughly where the independent sponsor universe lives), the sponsor is negotiating three separate fee lines, not one.
Closing fee. This is the number most often confused with "the sponsor's economics," and it isn't. Holland & Knight pegs the LMM range at 2 percent to 2.5 percent of enterprise value, tightening to 1 to 2 percent once you cross into the $100M-plus middle market. Access Capital Partners reports a wider observed band of 1 to 4 percent, or a fixed $100K to $1M, with smaller deals biased toward the high end. On a $25M LMM platform, that is a $500K-to-$1M check at close, before any of it gets rolled.
Management fee. Annual, paid quarterly, calculated against EBITDA. Holland & Knight again: 4 to 5 percent of EBITDA for LMM, with floors and caps that show up about half the time. Access Capital reports a broader 1 to 7.5 percent and notes their own deals have historically run 5 to 7.5. On a $4M EBITDA business that is $160K to $300K a year. Real, but not a salary three people can split.
Carry, or "promote." The longest tail. The MVA law side-by-side describes 10 to 30 percent Class P carry on invested capital. Holland & Knight is more granular: a base of 10 to 15 percent, stepping up to 20 to 25 percent at the next hurdle, and as high as 30 on home-run exits. TIFF, sitting on a decade of deal flow, says the 25 percent premium tier is rarely negotiated successfully. Pref hurdles cluster at 8 percent. Holland & Knight gives the 5 to 9 percent band, typically 8, accruing and not compounding in lower-middle-market deals, while noting compounding pref returns turn up more often once you step up into the broader middle market. That's the sponsor's win on LMM and the LP's win on bigger deals.
How much of the cash actually shows up as cash
The McGuireWoods 2022 survey, which is still the deepest public dataset, found independent sponsors rolled more than half of their closing economics into equity in roughly 60 percent of transactions. Holland & Knight observes a similar pattern: 50 to 100 percent of after-tax closing fees end up back in the cap table.
Not everyone agrees. Eli Albrecht, working on the operator side, writes that only about 25 percent of his platform deals roll 100 percent of the transaction fee and that on add-ons the fee is "almost always taken in cash." The honest read across these sources is that rollover is a negotiated variable, not a market norm. The capital partner usually pushes for it, the sponsor with a stronger thesis can take more of the fee home in cash, and add-on economics break the platform's pattern.
When fees do get rolled, the form matters. Albrecht's own ranking, top down: preferred equity alongside the LP (best), profits interests below the waterfall (middle), or tucked inside the carry itself (worst, and rare).
The three capital-source archetypes
The legal documents are roughly the same across deals. The economics swing on who the money comes from.
Family office, single LP. Patient, prefers long holds, and will often agree to higher carry tiers in exchange for sector familiarity and off-auction access. Morgan & Westfield's writeup describes them as buyers who prefer longer hold times, avoid auctions, and are open to minority positions where they leave control to others. Read together with the carry-tier ranges above, that combination (patient capital, willingness to cede control, off-auction posture) is the profile most naturally aligned with a first-time sponsor bringing sector edge and no fund track record.
Fund-of-funds or mezzanine/equity fund. Programmatic. Sees fifty deals a year, wants standardized docs, will trade economics for repeat flow. TIFF, who play this role, report 60-plus deals with 25-plus sponsors since 2014 and explicitly note that long-term partnership beats one-off transactions. Carry tiers get compressed; the sponsor gives up some upside to lock in a partner who will say yes again.
Institutional LP. Rare in this market. TIFF puts institutional involvement at 5 percent of lead investors and 11 percent of capital across 2021 to 2024. They show up on bigger deals, with longer diligence, and they almost always demand the better rollover terms.
The cohort math and the close-rate denominator
The math looks fine on paper. Two percent of a $25M deal, plus four percent of $4M EBITDA, plus a 15-to-20 percent promote at exit, against a sourcing-to-close cycle that practitioners typically describe in multiple-quarter rather than multiple-month terms. That pencils for a single principal.
It stops penciling when you remember what comes first. Independent sponsors run their own deal sourcing, their own LOI calendar, and their own LP raise, and they do it without management-fee income because there is no fund. The deals that close are the ones where the LOI cleared, the lender said yes, and the LP wired the equity before the seller's patience expired. The deals that don't close pay nothing.
That is the gap nobody surveys. From the data side, the cohort number we actually want to know is the close rate from "thesis" to "wire" — the share of seriously-pursued targets that become real transactions. We've asked. Nobody publishes it because nobody has it cleanly. The McGuireWoods survey skews to sponsors who closed something. The sponsors who burned eighteen months on two dead LOIs aren't filling out the form. Every fee range in this post is conditioned on a closed deal; the close-rate denominator is the variable that swallows all of them, and it's the one no survey has touched.
That's the question we'd want answered, and it's the one we keep building data layers against. Until somebody runs the cohort study, the fee tables describe the winners and miss the population. The sponsor's real economics live in the denominator.
