What are typical independent sponsor fees and carry?

What fees do independent sponsors charge?

An independent sponsor finds a company, negotiates the deal and raises equity for it from a capital partner, such as a family office or a private equity fund. The sponsor has no committed fund, so fees pay for the work before and after closing. The 2025 Citrin Cooperman survey found:

• Closing fee. Most commonly 2% of transaction value, reported by 56% of respondents. It is paid at closing, usually from deal proceeds.
• Management fee. Most commonly 5% of EBITDA, reported by 69% of sponsors who charge a percentage of EBITDA. Others charge a fixed amount.

Both are paid whatever the outcome. That is why capital partners negotiate them. A management fee is also a cost to the company. It reduces the cash available for debt service, and lenders count it.

How does carried interest work?

Carry is the sponsor's share of profit after the capital partner is paid back. Three terms decide how much it is worth.

• The hurdle. The return the capital partner must receive before carry applies. The survey's most common range was 8–9.9%, reported by 63%.
• The catch-up. Once the hurdle is cleared, a full catch-up gives the sponsor a larger share of the next dollars until the sponsor has its full carry percentage of all the profit. 74% of respondents had one. Without a catch-up, carry applies only to profit above the hurdle.
• Tiers. Carry usually starts at a minimum, 10–25% in the survey, and rises as returns rise. 64% could reach a maximum carry of 25% or more. The maximum applies only at the top of the return range.

What is the carry split trap?

The trap is planning your income around the headline number. Four things stand between a 25% maximum carry and what reaches your bank account.

• Tiers. At a moderate outcome, you earn the minimum tier, not the maximum.
• No catch-up. Without one, the hurdle return comes out of your carry base for good.
• Sharing with management. If you do not run the company, the CEO you hire will expect equity or a share of carry. That share comes out of yours unless the capital partner funds a separate pool.
• Co-sponsors and finders. Anyone who brought the deal, the capital or the CEO may expect a split.

Negotiate the split with management and co-sponsors in writing before the LOI. Run the numbers at a 2x outcome, not only at the best case.

If you are a sponsor or a capital partner

If you are a sponsor, the catch-up and the minimum tier are worth more to you than the maximum tier, because they apply at ordinary outcomes. Ask whether any of the closing fee must be reinvested in the deal. Ask how the management fee is treated in the lender's covenants.

If you are a capital partner, the fees are your certain cost and the carry is your contingent one. A sponsor whose fees cover their living costs has less at stake in the outcome. That is one reason to trade lower fees for higher carry. Check what the sponsor is investing alongside you.

Worked example: what a sponsor actually earns

The deal size, exit and carry tier are assumptions. The fee rates and hurdle come from the survey.

1. Company with $3,000,000 of EBITDA, bought at 6.5x: $19,500,000.
2. Closing fee at 2%: $390,000.
3. Management fee at 5% of EBITDA: $150,000 a year, or $750,000 over five years.
4. Capital partner invests $9,000,000 of equity. Equity is worth $18,000,000 at a sale in year five. Profit: $9,000,000, a 2x outcome.
5. Hurdle at 8% compounded for five years: about $4,224,000 of the profit goes to the capital partner first.
6. Carry tiers: 15% minimum, rising to 25% only above 3x. At 2x, the 15% tier applies.
7. With a full catch-up: 15% × $9,000,000 = $1,350,000.
8. Without a catch-up: 15% × ($9,000,000 − $4,224,000) = about $716,000.
9. Headline expectation at 25%: $2,250,000.
10. If the sponsor shares a third of the carry with the CEO: $1,350,000 becomes $900,000.

Carry ranges from about $716,000 to $1,350,000, or 8–15% of the profit. Add $1,140,000 of fees. Total over five years: about $1.9 million to $2.5 million before any split, against a headline expectation of $3.4 million.

Where these numbers come from: Fees, carry, hurdles and catch-up terms come from the Citrin Cooperman 2025 independent sponsor survey. The 6.5x multiple is GF Data's 2024 median for companies with $10–100 million of enterprise value, via Carry and Conquer.

Related questions

Do independent sponsors invest their own money?

Expect the capital partner to ask. The amount is negotiated, and rolling part of the closing fee into the deal is one way to fund it. A larger personal check gives you more to negotiate with on carry.

Is a management fee of 5% of EBITDA high?

It is the most common percentage in the survey. On a company earning $3 million, it is $150,000 a year. Whether it is high depends on the work the sponsor does after closing.

How is this different from a self-funded searcher's economics?

A self-funded searcher typically owns 60–80% of the equity and takes a salary of $100,000–$150,000. A sponsor owns little equity and is paid in fees and carry. The searcher has more upside and a personal guarantee. The sponsor has less of both.

Can an independent sponsor build a holding company?

Not easily, deal by deal. Each deal has its own capital partner, terms and exit timeline. A holding company needs capital at the parent and a reason to keep what it buys.

What comes next

A sponsor's fees replace a salary. A searcher who runs the company sets one, which is covered in How much salary can I pay myself after buying a business with investors?

Related articles

• What are standard investor terms for a self-funded search?
• How does the waterfall and preferred return work in a self-funded deal?
• How much salary can I pay myself after buying a business with investors?
• What's the difference between a self-funded searcher and an independent sponsor?
• How do you build a holding company for acquisitions?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.