We sat down with Nick Russell, Managing Partner of Tuckerman Capital, to explore key issues like future middle-market drivers, risks and opportunities to look out for over the next 12 months, and tips for building a successful business model. Read on for insights on these topics and more.

Q. What 3 key factors will drive the development of the middle market over the next 12 months?

The middle market is poised for significant developments over the next 12 months, influenced by three key factors. Firstly, the upcoming election year is expected to impact all markets, introducing new dynamics and uncertainties that will shape investment decisions and strategies. Secondly, there is an increasing focus of capital on the smaller end of the middle market. Large LPs approach this segment with caution due to scaling challenges, creating opportunities for intermediary allocators to thrive. This trend has been building over the past 15 years and is now gaining momentum. Finally, there is an increasing interest among talent—both independent sponsors and operating professionals—to build their careers in the smaller end of the middle market. This influx of skilled individuals is set to drive innovation and growth, making this segment more vibrant and competitive.

Q. What is the single top risk and the single top opportunity, which independent sponsors need to look out for over the next 12 months?

The top risk and the top opportunity are actually one and the same: the influx of new capital into the market to back independent sponsors. This presents a significant opportunity to get deals done and build robust portfolios. However, it also brings the risk of partnering with new investors whose behavior and reliability may be uncertain both during the deal process and post-closing. Navigating this landscape requires careful consideration and due diligence to capitalize on the opportunity while mitigating potential risks.

Q. What are your top 3 tips for independent sponsors looking to build a business model that will help them compete in today's competitive and diversified market?

In today's competitive and diversified market, independent sponsors need a robust business model to stand out. Here are the top three tips to achieve this:

1. Don’t be a generalist: Specialization is key. Focus on a specific sector or industry where you can build deep expertise and a strong reputation.
2. Find your deal niche: Identify a unique niche within your chosen sector that is underserved or has high growth potential. This will help you carve out a distinct space in the market.
3. Have an investment thesis: Go beyond just finding deals. Develop a clear and compelling investment thesis that outlines your strategy, vision, and value proposition. Develop a specific hypothesis for how value will be created and realized for you and your investor partners. This will guide your decision-making and attract the right investors.

Q. Why will you speak at iGlobal Forum's Independent Sponsors Summit in NYC on September 17-18?

Seeing old friends, and making new connections - what could be better?

Nick will join us for the panel discussion on "From Wild West To Established Alpha - How To Succeed In Today’s Competitive & Diversified Market,” together with fellow panelists Drew Brantley (Frisch Capital Partners), Caroline Kung (SagePath Capital), Rob Bauer (Bassett Creek Capital) and Paul Marino (Sadis & Goldberg), as well as moderator Claudine Cohen (CohnReznick) at the 17th Independent Sponsors Summit this September in New York. They’ll discuss what the next 12 months will hold for the middle market, and deep dive into credit markets, geopolitics, and emerging trends, and how they impact your portfolio and investment processes. Register now to join us this September at the Independent Sponsors Summit.