Hadley Capital, a private equity firm specializing in small company acquisitions, has been a leader in its space for over two decades. With more than 30 small business acquisitions over its history and an active fund in the marketplace (Hadley Capital Fund IV), Hadley continues to set the standard for success in the small business acquisition ecosystem.
Hadley’s recently announced Hadley Independent Sponsor Alliance exemplifies its commitment to fostering growth and creating value in the lower middle market. Tailored to meet the unique needs of experienced independent sponsors, this program provides both the capital required to close transactions and a robust framework for driving success post-acquisition.
The Lower Middle Market Opportunity
McGuire Woods notes the “vast majority of independent sponsor transactions are occurring in the lower middle market… more than 75% of the transactions surveyed involved target companies with an enterprise value between $10 million and $75 million.” This segment of the market is rich with opportunity, offering independent sponsors the chance to target companies with strong growth potential but likely lack access to traditional investment avenues.
Hadley Capital focuses on transactions requiring $2–$10 million in equity, an investment range perfectly aligned to the lower middle market “sweet spot”. With the Independent Sponsor Alliance, Hadley empowers capable sponsors to unlock value in portfolio companies while leveraging the firm’s extensive expertise in small company acquisitions.
What Hadley Brings to the Table
1. Professional Due Diligence Practices
Hadley’s access to highly vetted and trusted service providers, along with Hadley’s own thorough due diligence approach, ensures an accurate assessment of the strengths and risks of target companies. This rigorous process sets the stage for negotiating legal agreements, efficiently raising debt financing, and an accurate and timely closing of the acquisition.
2. Deep Financing Relationships
Financing is often a key hurdle in closing a small business acquisition. Hadley’s deep, well established relationships with debt providers enable sponsors to secure favorable terms and structure deals effectively. Hadley’s tenured track record of success in the lower middle market and our reputation for treating lenders as true partners in each acquisition sets us apart. Independent sponsors working with Hadley will benefit from our “seal of approval” within the debt financing community.
3. Legal and Corporate Structuring Expertise
From complex legal arrangements to tax-efficient structuring, Hadley’s team of legal and tax experts - including expertise in QSBS (Qualified Small Business Stock) tax treatment - offers independent sponsors a critical edge.
4. Post-Closing Management Enhancements – The Hadley Ownership System
Hadley’s extensive network of management resources allows for seamless team enhancements post-acquisition. Whether it’s finding key personnel or improving operational strategies, Hadley’s support ensures target companies are well-positioned for growth.
At the heart of Hadley’s value creation model is the Hadley Ownership System, a proprietary framework for developing and growing companies. This system focuses on aligning leadership, streamlining operations, and driving sustainable growth.
5. Alignment of Goals and Values
Hadley’s partnership philosophy prioritizes alignment between all stakeholders, fostering collaboration and trust throughout the transaction process and beyond.
Economic Alignment: A Shared Path to Success
Hadley’s Independent Sponsor Alliance is structured to align interests of all parties, ensuring that every stakeholder—from the sponsor to the target company management team—benefits from the success of the transaction. The program’s economics reflect the standards of the independent sponsor community while introducing elements designed to foster trust and collaboration.
Key Economic Features
- Closing Fees: Independent sponsors receive a competitive percentage of closing fees, with Hadley participating proportionately.
- Closing Fee Rollover: Independent sponsors are encouraged to roll over a portion of their closing fees as pari-passu equity.
- Management Fees: Shared management fees subject to the target company’s EBITDA.
- Equity Participation: Independent sponsors enjoy pari-passu equity participation rights for all closing fee rollovers and hard investments in the target company.
- Equity Promote: Sponsor equity promote tied to long-term value creation.
- Transaction Expenses: Hadley shoulders pre-closing costs, including due diligence and legal expenses, reducing the financial burden on sponsors during the deal process.
Proven Success: A Recent Case Study
Hadley recently partnered with an experienced independent sponsor to complete a significant lower middle market acquisition, demonstrating the program’s potential. In this case, Hadley provided over $12 million in equity financing and facilitated an additional $25 million in debt financing. This collaborative effort enabled the sponsor to close the deal efficiently and establish a solid foundation for post-acquisition growth. Less than a year later, the partnership formed between Hadley and the independent sponsor has resulted in a successful transition from the target company founders and a greater than 20% per annum revenue growth rate.
Ideal Transactions for the Program
Hadley’s Independent Sponsor Alliance is designed for transactions that meet the following criteria:
- Market Purchase Price: Fair and reasonable valuations
- Growth Potential: Clear opportunities for expansion and operational improvement
- Target Industries: Light manufacturing, business services, and specialty distribution
- Alignment: Shared values and strategic goals between the sponsor and Hadley
Independent sponsors with deals under Letter of Intent (LOI) are encouraged to engage with Hadley early in the process. The firm evaluates opportunities quickly and confidentially, ensuring timely feedback and decision-making.
Why Choose Hadley?
Hadley Capital offers independent sponsors a unique combination of resources, expertise, and alignment that is unmatched in the lower middle market. By partnering with Hadley, sponsors can:
- Close with Confidence: Secure the financial and operational backing needed to navigate the acquisition and get it to the finish line.
- Enhance Target Companies: Leverage Hadley’s post-closing resources and decades of experience to drive growth and create value.
- Align for Success: Benefit from a transparent, fair economic structure that prioritizes long term outcomes over short-term wins.
Partner with Hadley
If you’re an experienced independent sponsor seeking a value-added equity partner to complete your next transaction, the Hadley Independent Sponsor Alliance could be your ideal solution. With a proven track record of success, unparalleled resources, and a collaborative approach, Hadley Capital is poised to help you unlock the full potential of your investment.
Contact Hadley Capital today to learn more about the Hadley Independent Sponsor Alliance and how it can transform your next transaction into a long-term success story.
