Independent sponsor deals deliver higher returns than traditional lower middle market buyouts, new Institute for Private Capital study finds

First large-scale empirical analysis benchmarks 846 independent sponsor transactions against comparable U.S. buyouts

WASHINGTON, D.C. (June 22, 2026) – Independent sponsor investments generated higher median gross Internal Rate of Return (IRR) than comparable U.S. buyout transactions, without higher downside risk, according to a new report by the Institute for Private Capital (IPC). Produced in collaboration with the Small Business Investor Alliance (SBIA) and its Independent Sponsor Forum (ISF), the study analyzes 846 independent sponsor transactions and is the first large-scale empirical analysis of independent sponsor investment characteristics and performance.

The report found that independent sponsor deals generated a median gross IRR of 23.8%, compared with 18.5% for matched buyouts, a statistically significant difference. The median independent sponsor deal returned 2.1x invested capital. Loss incidence was statistically indistinguishable from comparable buyouts, at 23.5% for independent sponsor deals versus 21.6% for matched buyouts.

“Independent sponsors have become one of the most important and fastest-growing channels for investing in the lower middle market, yet until now there has been almost no hard data on how these deals actually perform,” said SBIA President Brett Palmer. “This study gives investors, sponsors, and policymakers the first rigorous, large-sample look at the returns and risk of this market, and the findings confirm what our members have long understood: independent sponsors are specialized business builders delivering real value.”

“For years, investors and sponsors have asked how independent sponsor deals compare with traditional buyouts,” said Stephanie McAlaine, Executive Director of the Independent Sponsor Forum. “This report provides a data-driven answer and gives both sponsors and capital providers a clearer argument for investing in this high growth asset class, either directly or through a fund.”

Authored by Prof. Gregory Brown and Prof. William M. Volckmann II of IPC and UNC Kenan-Flagler Business School, the study analyzes data reported by both investors and independent sponsors. To reduce selection bias, all performance figures rely on capital-provider-reported data. Returns reflect the equity component of these investments only, net of independent sponsor economics and before investor-level fees.

The study benchmarks each independent sponsor investment against comparable U.S. buyout transactions up to $100 million in investment size, matched by entry year, from the MSCI Private Capital Universe.

Key Findings

All performance figures reflect equity returns only, net of independent sponsor economics and before investor-level fees.

• Independent sponsor deals generated a median gross IRR of 23.8%, compared with 18.5% for matched buyouts. The median deal returned 2.1x invested capital.
• Company-level outcomes included EBITDA multiple expansion averaging 3.5 turns over the hold period. More than 75% of companies saw multiple expansion, and the median portfolio company grew its workforce by 17%.
• Loss incidence was statistically indistinguishable from comparable buyouts: 23.5% for independent sponsor deals versus 21.6% for matched buyouts.
• Performance dispersion was wide. About a quarter of deals returned 4.0x or more, while roughly 5% were complete write-offs.
• The typical independent sponsor in the sample was experienced: 88% had prior private equity experience, two-thirds of transactions were completed by serial sponsors with three or more deals, and most sponsors operated with one or more partners.

Click here to read the full report on the IPC website >

Read the executive summary >