An independent sponsor identifies and negotiates an acquisition without a committed fund standing behind it, then raises the equity for that specific deal, one transaction at a time, usually from a small group of investors it already knows.
Because there is no fund and no standing limited partnership agreement, each deal's equity raise is its own securities-law event. Independent sponsors typically raise it under the "friends, family and business associates" route in National Instrument 45-106 section 2.5, available to a director, executive officer, founder or control person of the issuer and to that person's close personal friends and close business associates, with no commission or finder's fee payable to any of them on the distribution. In Ontario, section 2.6.1 adds a further condition: a signed risk acknowledgement from the purchaser and from the specific individual whose relationship the exemption relies on, retained for eight years.
The financing side carries its own trap. Where an independent sponsor structures the acquisition as a purchase of shares, often to accommodate a seller's own tax position, the federal government's loan-guarantee programme, the Canada Small Business Financing Program, is not available for it: the programme's own guidance states plainly that a loan cannot be used to finance "share purchases or assets that a holding company acquires," only the purchase of eligible assets of an existing business, financed at the lesser of cost and appraised value. A sponsor assembling its debt stack around a share deal cannot count on that guarantee.
Without a fund behind it, an independent sponsor is also usually paid the way a GP is paid, compressed onto a single deal: a management fee for running the company post-close, plus a carried-interest-style "promote" once its investors have cleared their own preferred return, structured on essentially the same tiers as a fund's distribution waterfall — just negotiated once, for this one transaction, rather than set once for a whole committed pool of capital across many deals.
An independent sponsor identifies a $12,000,000 manufacturing target structured as a share purchase. It raises $4,000,000 of equity from six close business associates under the section 2.5 exemption, each signing an Ontario risk acknowledgement, and arranges $8,000,000 of senior debt from a bank on ordinary commercial terms to complete the $12,000,000 purchase price — not under the Canada Small Business Financing Program, which the share-purchase structure rules out. The sponsor's own promote on this deal is negotiated as 20% of profit above an 8% preferred return to its six investors, the same tier structure a fund's LPA would use, fixed for this one transaction alone.
See also: Co-investment right · Limited partnership agreement · Dry powder.
A 30-minute call is enough to tell you whether AI pays for itself here.
Canadian small-business transaction data is not published anywhere, so most valuations in this country quote an American benchmark. The Deavo–Treadstone Acquisition Index is a daily record of Canadian listings built to replace that: asking-price distributions by province and city are published now, and days on market, departure rates and asking-to-sale spreads follow as the series lengthens. Leave an email and we will tell you as each measure lands.
No pitch, no listings. One email as each measure is published.
