Independent sponsors are playing a bigger role in lower middle-market deals. As they hustle to find the right family-owned business to back, they’re vulnerable to the same challenges as private equity firms, says Steven Marcus, founder Rainbow Capital. Unlike a PE, which raises a fund prior to doing deals, Marcus pursues capital after agreeing to be a part of a transaction, with the hope that his “big bank” expertise gives him the edge he needs to seal a deal at just the right price. Watch the video with Marcus below, or click here.
Marcus, who founded Rainbow in 2001, also has experience as a private equity investor. Prior to that, he spent 14 years in the high yield bond market and leveraged finance. Among the major investment banks he worked for, are Donaldson Lufkin and Jenrette, Smith Barney Inc., PaineWebber Inc. and L.F. Rothschild Unterberg and Towbin. Over the years, Marcus has been involved in numerous junk bond financings as well as many privately negotiated transactions of debt and equity securities.