Financing for Independent Sponsors
PCA’s alternative lending solution is uniquely suited to the ongoing capital needs of independent private equity sponsors. Independent (or “fund-less”) sponsors are private equity investment professionals who source deals andfinance acquisitions on a deal-by-deal basis, and who may not be ready, or may prefer not to, raise a committed capital vehicle (a “fund). While there are benefits to this arrangement, one of the tradeoffs is that the sponsor needs to raise capital, including often the equity portion, for every deal that they find. This can lead to a slower transaction process, which can be
disadvantageous when competing for deals. Additionally, the sponsor often has to offer their investors attractive, or even onerous, terms to get a transaction done
PCA’s Lending Solution, an Effective Tool
for Independent Sponsors
For those independent sponsors who have developed a track record and who may now have multiple investments in their portfolios, PCA’s lending solution can serve as a uniquely useful tool for obtaining much-needed liquidity. PCA’s loan facilities function like a NAV loan to the sponsor, secured by the equity in their existing portfolio companies. The tailored loan facility can provide the sponsor with valuable, non-dilutive liquidity that may then be utilized in a variety of ways. Sponsors can use loan proceeds to fund their equity contributions to follow-on investments, bridge to a liquidity event, recapitalize more expensive sources of capital, or provide the firm or portfolio companies with working capital. As such, PCA’s loan facilities enable the independent sponsor to invest opportunistically as if they had a fund to draw upon, enabling them to compete more effectively for deals
How PCA’s Lending Solution Supports the Independent Sponsor Model
01.
NAV Loan Against Existing Portfolio: Leverage your existing portfolio by obtaining an NAV (Net Asset Value) loan from PCA. This provides you with the necessary liquidity without having to wait for portfolio realizations, enabling you to act quickly on new opportunities
02.
Enhance Competitive Position: With immediate liquidity at your disposal, you can move much more quickly on transactions. This speed can often be the decisive factor in winning competitive deals where time to close is critical
03.
Contribute as Equity: Use the liquidity provided by PCA to contribute as equity to new deals. This allows you to strengthen your investment position and increase your potential returns without the need to raise a committed capital vehicle prematurely
04.
Preserve Ownership and Control: By securing financing against your existing portfolio, you avoid the need to dilute ownership or control through raising additional equity from external sources.
Use Case Scenarios for Independent Sponsors
Competing on New Deals
Independent sponsors often face the challenge of competing with larger firms that have ready access to capital. PCA's financing solutions provide you with the liquidity to act swiftly on new deals, leveling the playing field and increasing your chances of securing attractive investments
Bridging to a Committed Fund
For sponsors who are in the process of raising a committed capital vehicle, our financing can serve as a bridge, providing the necessary liquidity to continue executing deals while fundraising efforts are underway.
Supporting Existing Portfolio Companies
Use our financing solutions to provide additional capital to existing portfolio companies for growth initiatives, acquisitions, or operational improvements, enhancing the overall value of your portfolio.
Recapitalize More Expensive Sources of Capital
In an effort to get a desired transaction done, independent sponsors may utilize an expensive tranche of capital with the intention of recapitalizing that tranche in the fullness of time. PCA’s loan facilities enable the independent sponsor to clean up such tranches of capital that may have been used as a short-term solution to close a transaction
Expanding Investment Strategy
With immediate access to liquidity, independent sponsors can expand their investment strategy, pursuing a broader range of opportunities and increasing diversification within their portfolio.
Bolster Working Capital
By gaining access to incremental liquidity, independent sponsors can
enhance the working capital of their firms or portfolio companies, ensuring they are set up for success.