Deal-by-Deal Is Growing, but the Lender You Pick Still Matters More

Citrin Cooperman’s 2025 Independent Sponsor Report found that 86% of independent sponsors plan to complete one to two platform deals in the next 18 months [1]. The deal-by-deal model is maturing fast. But most of the conversation about it, including a recent Acquinox Capital piece arguing investors are “dumping funds for deal-by-deal opportunities,” focuses on the investor side of the equation. Optionality, transparency, avoiding blind pools. Almost nobody talks about what happens between LOI and close, which is where independent sponsors actually win or lose.

The Flexibility Premium Is Real, but Incomplete

We’re not going to argue against deal-by-deal flexibility. For independent sponsors, the ability to evaluate each opportunity on its own merits, to match capital to conviction, is genuinely valuable. Investors get transparency. Sponsors keep control. And in a market where roughly 1,600 active independent sponsor firms are operating in the U.S. [2], the model has clearly moved past the “alternative” label into something closer to standard practice for a whole segment of LMM dealmaking.

The Acquinox article frames the shift as driven by valuation dispersion, liquidity constraints, and technology. Fair enough. All three are real forces. But the article reads like it was written for the person writing the check, not the person running the process. And if you’re an independent sponsor, the process is where all the risk lives.

The independent sponsor model doesn’t fail on deal selection. It fails on execution, on the gap between finding a good deal and actually closing it.

What Happens Between LOI and Close

Jon Finger, a well-known practitioner in the independent sponsor space, put it bluntly in a recent roundtable: of deals that reach exclusive LOI, somewhere around two-thirds to three-quarters actually close [3]. That’s a meaningful fallout rate, and it’s gotten worse as the market has become more competitive. The deals are there. The capital is theoretically available. The problem is getting everything aligned, equity investors, senior lenders, junior capital, legal, diligence, on a timeline that doesn’t spook the seller.

Sellers and their advisors care about certainty of close. A lot. Bankers have historically carried a bias against independents precisely because the fundless model introduces capital risk that committed funds don’t carry [4]. That bias has softened as the sponsor population has professionalized, but it hasn’t disappeared. And when a process gets competitive, the sponsor who can demonstrate a reliable capital stack, particularly on the debt side, has a real edge over the one who’s still assembling.

The bias against independent sponsors hasn’t gone away. It’s just become more specific. Bankers don’t doubt your deal sense anymore. They doubt your ability to close on time.

Lender Relationships Are a Compounding Asset

There’s a version of the deal-by-deal model where the sponsor treats every transaction as a standalone event. New lender outreach, new term sheet negotiations, new relationship dynamics. This works if you do one deal every couple of years and don’t mind spending three months on the debt side alone.

The better version, the one we see among the most effective independent sponsors, treats lender relationships as compounding assets. You close one deal with a lender who understands your sector focus and your diligence process. The next deal moves faster because underwriting doesn’t start from zero. By the third deal, you’ve got a capital partner who can commit in days, not weeks. WhiteHorse Capital’s H.I.G. team made this point directly in a recent piece on independent sponsor lending: the sponsors who come back after a successful exit tend to get faster execution, broader capital solutions, and better terms on follow-on deals [5].

This is the part that gets lost in the “investors want control” narrative. Yes, investors want to evaluate each deal. But independent sponsors need repeatable infrastructure around each deal, and the debt side of the capital stack is where that infrastructure either exists or doesn’t.

Flexibility on the equity side means very little if you can’t deliver certainty on the debt side.

At Avante, we see this dynamic constantly in the lower middle market. The sponsors who’ve done the work of building lender relationships before they need them are the ones who can move at the speed a competitive process demands. The ones who start fresh each time tend to either lose the deal or accept worse terms to get it done.

The Hybrid Model Is Probably the Future

Acquinox’s article suggests that “private markets aren’t becoming fundless, but they are becoming far less blind.” We’d go a step further. The 2025 Citrin Cooperman data shows hybrid models (combining elements of committed capital with deal-by-deal co-investment rights) grew to 22% of deals in 2025, up from 16% in 2019 [1]. That six-point shift over six years is significant, and it suggests the market is converging on something in between pure blind pool and pure deal-by-deal.

For independent sponsors, this has practical implications. If you’re building toward a committed vehicle eventually, every deal-by-deal transaction you close is part of that track record. The lenders, the equity partners, the service providers you work with now become the infrastructure of whatever comes next. Treating each deal as disposable, optimizing for this transaction rather than the next five, is short-term thinking in a model that rewards long-term relationship building.

What This Adds Up To

The deal-by-deal trend is real and probably irreversible for a meaningful share of LMM transactions. But the conversation needs to mature past the “investors want optionality” framing and into the operational reality of what makes deal-by-deal execution work. The answer isn’t technology platforms or streamlined SPVs, though those help. The answer is relationships with capital providers who understand your model, trust your diligence, and can move when you need them to.

If you’re an independent sponsor reading the Acquinox piece and nodding along about investor flexibility, ask yourself a different question: when you find the right deal next month, how fast can your lender commit?