Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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Zurich was shrouded in a thick winter fog when I sat down for a coffee with James Roebuck and Stefan Matei - partners at Opera Investment Partners, a Switzerland-based GP that backs Independent Sponsors across Europe.

Founded in 2020, Opera sits at the intersection of two major trends: PE professionals leaving larger funds to build their own platforms and institutional capital flowing into deal-by-deal investing.

The market is HOT!

In the US, Independent Sponsors represent 40% of all small-cap PE deals. Europe is catching up fast - currently at 15% with 150-200 transactions annually. The Opera team has tracked this market for the last 15 years and have developed deep pattern recognition from screening 1,100+ opportunities.

In case you are new to the Independent Sponsor phenomenon, check out our primer: Private Equity professionals are leaving in droves to set up “Independent Sponsors”. What are these - and should you start one?

With so many allocators around, what makes Opera stand out?

Their approach. Opera evaluates both the company and the sponsor. Few will make the cut.

Their paranoia: focusing on the risks and what could kill a deal.

The upshot: consistent 4x+ MOICs and industry-leading reputation.

What makes Opera highly relevant for the RollUpEurope community is the fact that out of their last 10 transactions, all but one were rollups. If you tick Opera’s boxes, don't wait - reach out today. Or hit reply, and we'll make the connection.   

Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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Welcome to Episode 12 of our Rollup of Tomorrow series.

I didn't have to travel far for this interview. Over a coffee we went over:

1. Opera’s journey from a PE fund-of-funds - to a backer of Independent Sponsors

2. The investment case for Independent Sponsors

3. How big is the European Independent Sponsor TAM?

4. About that 98% rejection rate: what does it take to get funded by Opera?

5. Deal parameters and value creation 

6. Opera’s investment track record: how sustainable are those 4x MOICs?

7. Opera’s message to the RollUpEurope community

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1. Opera’s journey from a PE fund-of-funds to a backer of Independent Sponsors

Alex: First question: how did you guys get here? What's the backstory of Opera and how did you meet?

James: We met while working at Clearsight, investing in emerging funds and Independent Sponsors in Europe before either were their own categories. Between 2010 and 2020, we gained a fairly unique experience backing first-time turnaround funds and deal-by-deal co-investments (but rarely first-time teams!), often as the sole investor. During this time we were always very close to the companies, meeting management teams, touring the factories etc. 

In 2020, the three of us (James, Stefan and Michelle - pictured below with Alex) spun out and raised our first fund. Since then, we've been leaning into the Independent Sponsor part of our strategy and have backed 15 deals since 2022.

2. The investment case for Independent Sponsors

Alex: Let's talk about the investment case. Why should one allocate to Independent Sponsors versus mid-market PE funds? What’s your pitch to the LPs?

Stefan: We evaluate across two dimensions simultaneously: company quality and manager quality. Both have to be exceptional.

On the company side, we look for genuine quality at a discount. Not businesses riding market trends or banking on non-recurring projects. We see most of what's happening in the market, and we've developed strong filters over the years. Battle scars make you a better investor. 

James: On the sponsor side, we back talented PE professionals who've left large firms to build something of their own. These are often people who became frustrated with ever-larger fund sizes, ever-higher valuations, and organizational politics. They want to step down-market to avoid that, have a tangible impact on businesses and invest more of their own money.

The blend of entrepreneurship, high PE-skills, plus focus on the underlying businesses can be compelling. These people aren't bringing a legacy portfolio. They're starting fresh. They're looking at one, maximum two transactions per year. We're able to back them for that.

James: And from the LP lens specifically, there are three things. First, Independent Sponsors have no deployment pressure. Traditional funds have to deploy capital on a schedule to raise the next fund. It's an endless cycle. With Independent Sponsors, they invest their own money first. You only join when there's a great opportunity.

Second, alignment. These sponsors have serious skin in the game. They're making great returns on their own capital before you even write a check.

Stefan: Third, the funding problem is materially reduced. It used to be that sellers were cautious about Independent Sponsors because they weren't sure about funding. Now, with institutional capital providers like Opera backing proven sponsors, that concern is gone. Success brings more success - if a sponsor does a good deal, getting funded for the next one is much easier.

And for the sponsors themselves? No waterfall to repay. No big team to support. No constant fundraising. They can focus almost entirely on finding great companies and creating value.

3. How big is the European Independent Sponsor TAM?

James: We've watched the market evolve to become a really significant part of PE in Europe, essentially mirroring what happened in the US.

In the US, Independent Sponsors really took off from about 2013-14. Now they represent about 40% of all small-cap deals (note: HIG estimates that the number of US Indy Sponsors has doubled in the last 5 years). Incredible, right? Europe is getting there. We think the equivalent percentage is about 15% as of today. 

Alex: Those 15% of the market - what is it in terms of deal count? How has that evolved?

James: Very rough figures, but probably about 1,000 deals in small-cap Europe. We estimate about 150-200 transactions currently from Independent Sponsors. So 15-20%. We're about half, perhaps a little more than half, the size of the US in terms of Sponsor volumes, but growing quite rapidly, particularly in the last 5-6 years.

4. About that 98% rejection rate: what does it take to get funded by Opera?

Alex: Your marketing deck says you've screened 1,100 opportunities in 15 years, but invested in only 23. That's a conversion rate of <2%. What are the key Independent Sponsor characteristics you look for?

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