In a recent episode of Investors & Operators, John Koeppel—a veteran deal attorney with 27 years in private equity—broke down the full independent sponsor deal lifecycle and shared actionable insights on how to win deals and avoid common pitfalls.
Pre-LOI: Win the Seller, Win the Deal
These four things consistently help independent sponsors win sellers over:
- Build real relationships. Sellers want to feel that you genuinely understand their business, their industry, and what matters most to them.
- Sell the second bite. Many strategics can’t offer rollover equity. You can—and that’s a powerful differentiator. For sellers who care about their legacy and believe in the future of their business, the second bite offers a chance to stay involved and share in the upside, often earning more than they did at the initial sale.
- Bring credibility. Sellers want to know that you can actually close the deal. Start building relationships with capital partners early, even before the LOI. Get soft indications of interest, comfort letters, or emails outlining their intent to partner.
- Pick your battles. Many successful first-timers focus on proprietary or semi-proprietary deals, where relationship-building and creative structuring matter more than a winning bid.
LOI Execution: Structuring a Fundable LOI
While it might feel like a win just to get an LOI signed, the real goal is to structure an LOI that’s both fundable and aligned with your long-term plan.
- Align with the story you’ve already told. Your LOI should reflect the same vision, address their key concerns, and reinforce the reasons the seller trusted you in the first place.
- Keep it clear and simple. In many lower middle-market deals, the seller and their advisors may not have extensive M&A knowledge. If your LOI is too vague, too complicated, or full of legal jargon, it will slow down the process.
- Don’t hide red flags. If there’s a major risk, like customer concentration or operational gaps, acknowledge it. Trying to gloss over issues only creates friction later during diligence and negotiations.
- Avoid overpromising. Inflated valuations, unrealistic earnouts, or seller-friendly notes might look good on paper. But if those terms can’t be backed by capital partners, you’ll be forced to renegotiate—damaging trust.
One of John’s simplest (and most overlooked) tips: ask potential investors what a fundable, attractive LOI looks like. Most will gladly tell you.
Post-LOI Diligence: What a Great Process Looks Like
For first-time sponsors, how you manage this phase sets the tone for everything that follows. Here’s what separates a smooth process from one that falls apart.
Choose the right advisors
✅ Specialized advisors who understand independent sponsor deals, not just general M&A. They can anticipate issues and navigate structuring complexities.
❌ Generalist advisors may slow the process or miss deal-specific risks entirely.
Lead with process and structure
✅ Clear timelines and regular check-ins keep everyone aligned and the deal moving forward.
❌ No timeline or accountability leads to delays, frustration, and lost momentum.
Address risks early and come with a plan
✅ Calling out red flags upfront builds trust and gives everyone time to find solutions. And backing it up with a clear risk-mitigation plan shows you’re prepared and protects your investors.
❌ Ignoring or delaying known risks until the last minute creates friction and can derail the deal.
Support the seller through diligence
✅ Many sellers in proprietary deals aren’t prepared. A hands-on sponsor helps them get organized or brings in outside support.
❌ Letting sellers flounder with missing data or unclear expectations slows everything down.
Capital Raising Post-LOI: Attracting the Right Partners
For independent sponsors, this phase is all about proving you can lead a tight, credible, and investor-ready process. Here’s what John Koeppel says sets strong sponsors apart:
- Readiness to lead the process. Be the one driving timelines, communication, and accountability.
- Clean, tight materials. Have your teaser, CIM, financial model, and data room ready to go. Make sure your materials are polished, consistent, and reflect the quality of the opportunity.
- Transparency and responsiveness. If you react poorly to feedback or aren’t willing to revise, that’s a red flag. Be upfront when you don’t know something, and take feedback seriously.
- Clear story and terms. Be ready to explain how you’ll grow the business, who’s leading it, and how value will be created. At the same time, know your economics: how much equity you’re putting in, how fees are structured, and what your carry looks like.
Post-Close Execution: How to Drive Value
Post-close success depends on execution: putting the right people in place, activating the growth plan, and staying ready for whatever comes next. According to John, these are the three pillars of getting it right after close:
- A strong management team. Whether you’re relying on the existing leadership or bringing in new talent, the team must be capable of scaling. This could mean adding an operating partner or placing a key hire in a strategic role.
- A thoughtful growth plan. Have a clear roadmap for both organic and inorganic growth ready. This includes dialing in GTM strategy, building scalable systems, and identifying bolt-on acquisition targets.
- Sale readiness from day one. Even if you’re not planning to sell anytime soon, you should build discipline into your operations. First, you never know when the right buyer will show up. Second, this mindset sends a signal to capital partners and potential buyers that you know how to build a business with long-term value in mind.
For a deeper dive into the independent sponsor deal lifecycle, tune into the full podcast episode.
