By Kieran McKenzie, Debt Finance Director, OakNorth 

Independent sponsors haven’t always had an easy time raising debt. Without a committed fund behind them, even experienced investors with a strong deal could find that the structure itself narrowed their choice of lenders. 

That’s changing. We’re seeing more experienced mid-market investors choose to operate independently, with several factors driving this growth. For experienced private equity professionals, the independent model can offer greater flexibility to pursue opportunities outside a traditional fund mandate, alongside the ability to retain more of the economics they create. At the same time, the growing availability of capital from family offices, institutional investors and other deal-by-deal equity providers has made the model increasingly viable. 

At OakNorth, we’re increasingly interested in financing the businesses they back. For us, the absence of a committed fund isn’t a reason to stop looking at a deal. It means underwriting the structure on its own terms, rather than using the lack of a fund as a proxy for the quality of the sponsor or the transaction. 

What we look for 

Independent sponsors have to raise equity for each transaction, so every deal needs to stand on its own merits. That can create strong discipline around the opportunities they pursue, the price they pay, and how they build the investment case. 

Many of the sponsors we speak to have spent years investing at established private equity firms. They’ve worked through different market cycles, sat on investment committees and built deep experience in particular sectors. What’s changed is the structure they’re investing through, not necessarily the experience behind it. 

There’s also a structural dynamic that’s easy to overlook. Because independent sponsors raise capital deal by deal, each business they back carries more weight in terms of their time, relationships and reputation. That concentration can translate into significant sponsor attention, personal accountability and operational focus on each investment. 

These distinctions matter when we assess a transaction, but they do not remove the need for credit discipline. 

In the absence of a traditional fund structure, we look closely at where the equity is coming from and the certainty of that funding; the sponsor’s realised track record; the amount of capital genuinely at risk; governance and alignment; the ability to support the business if performance falls behind plan; and whether the sponsor has the resources and operating capability to deliver the investment thesis. 

Just as importantly, we want to understand the business itself: how it makes money, the quality of its customer relationships, the risks it faces, its resilience if trading does not follow plan and where future growth could come from. 

In other words, we assess the deal and the people behind it, rather than treating the presence or absence of a committed fund as a shortcut to a credit decision. 

What that looks like in practice 

Our recent financing of the secondary buyout of Jones Knowles Ritchie (JKR) is a good example. The strategic branding agency was backed by Breakwater Management, a Los Angeles-based independent sponsor focused on media, marketing and tech-enabled services. 

The independent sponsor structure was not a hurdle to get past; it was one part of the transaction to underwrite. We wanted to understand the business we were lending to, the experience and alignment of the investor behind it and the strength of the investment case. Breakwater brought relevant sector experience, including previous investments in marketing services. 

We still interrogated the risks in the underlying business, including the impact of generative AI on the creative market. JKR’s strategic role and long-standing relationships with globally recognised brands helped demonstrate why its proposition extends beyond the parts of the market most exposed to automation. 

And that’s the point. We don’t treat independent sponsor status as positive or negative in isolation. We focus on the fundamentals: who is backing the business, why they believe in it, how they will support it, in addition to whether the underlying credit case stacks up. 

What independent sponsors can expect from us 

We know that raising capital deal by deal creates different pressures from investing through a committed fund. Timing matters, and waiting until every part of the equity raise is complete before starting a debt conversation can make a transaction harder to execute. 

That’s why we’re happy to engage early. We can start looking at a deal while the equity raise is still being finalised, work through bespoke structures and move towards indicative terms as the transaction develops. 

As part of every transaction, the sponsor and management team present directly to our Credit Committee. That is more than a step in the process. It gives independent sponsors a forum to demonstrate their capability, sector expertise, conviction and plans for the business first-hand, rather than allowing the absence of a fund or a long institutional track record to become an automatic reason to say no. 

The process remains rigorous, but it is also more personal and relationship-led. Our decisionmakers can test the investment case directly with the people delivering it, while sponsors and management teams can hear the questions behind the credit decision and respond in real time. 

That combination – engaging early, underwriting each transaction on its own merits, accommodating bespoke structures and bringing the people making the lending decision into the relationship – is how OakNorth differentiates itself. It allows us to assess independent sponsors for what they are, rather than forcing them into a conventional fund template. 

The independent sponsor market is maturing. Many of the people choosing this route have significant investment experience and strong sector networks. They need lenders that understand the model, apply the right credit discipline and are willing to assess the people and opportunity in front of them. That’s where OakNorth fits.