[1] In addition to bringing capital to a deal, financial sponsors are expected to bring a combination of capital markets expertise, various important contacts, strategies for operational improvement, and the experience of owning leveraged companies.
The company's CEO and other senior management maintain responsibility for day-to-day operational issues.
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.
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.