Financial Sponsor - Sponsors and Other Investors

Sponsors and Other Investors

Various investor classes look to the financial sponsor to generate value in a company as much as the management or operations of the company. In particular, debt providers are willing to extend credit in the form of bank loans, high-yield debt and mezzanine capital based in part on the reputation of and relationship with the financial sponsor.

Additionally, many companies owned by financial sponsors will raise equity in the public markets through an initial public offering or (IPO) as a means of exiting an investment. Public investors will seek to align their own interests as much as possible with those of the financial sponsor by limiting the financial sponsor's ability to sell shares and managing the use of proceeds from the offering. Various studies have been conducted to evaluate the impact of financial sponsor ownership on the performance of IPOs.