02 · For PE Rollups & AI Startups
Better financing through AI transformation.
Your lender sizes to what the company earned last year. We size to what it will earn after a transformation we underwrite, staff and stand behind — so the junior tranche is bigger, cheaper, and does not cost you warrants.
The mispricing
Credit markets cannot underwrite the thing that now creates the value.
Financial engineering has asymptoted. Operational value creation has not, and AI is about to hypercharge it. But the lenders who fund your acquisitions have no way to diligence an automation programme — so they ignore it, and you pay for their blind spot in equity.
We have done the transformation
Our EBITDA delta comes from completed engagements with named workflows and measured hours — not a vendor's deck. We diligence the automation surface bottom-up: admin headcount, back-office process, producer workflow.
We control the execution risk
The tranche is drawn against an engineering partner we underwrite, with defined scope, milestones and KPIs. A passive lender has no recovery lever here. We do.
Our upside is the transformation
No warrants, no equity kicker. If the automation lands, the coupon steps to cash and everyone is paid. We would rather be right about the operations than dilutive about the outcome.
The structure
Two turns of leverage the market cannot see.
Sized to pro forma EBITDA after a scoped transformation, haircut for execution. The senior stays where it was; the equity cheque gets smaller.
Standard buyout
With Sincerity mezzanine
Illustrative only. Not an offer to lend and not a representation of any contractual terms. Every structure is negotiated deal by deal.
Mechanics
Underwriting, in six parts.
Sizing
Senior sizes to trailing EBITDA; we size to pro forma EBITDA after the scoped transformation — up to roughly two turns on the underwritten delta, haircut for execution risk.
Pricing & structure
Inside standard mezzanine pricing. PIK or toggle through an eighteen-to-twenty-four-month transformation window, stepping to cash-pay as realized EBITDA lands. No warrants.
Contingency
Drawn against an engagement with a Sincerity-underwritten engineering partner, with defined scope, milestones and KPIs. Covenants keyed to transformation milestones as well as leverage.
Underwriting
Bottom-up diligence of the automation surface. We size the delta from our own completed transformations, and we will show you the workflow inventory the number came from.
Intercreditor
Standard subordination to first lien. The PIK-first structure keeps fixed-charge coverage intact, so a larger junior tranche does not shrink senior sizing.
Downside
If milestones slip, the toggle stays on and steps up. Control of the engineering partner is a recovery lever a passive lender simply does not have.
Who this is for
Where the equity cheque is the binding constraint.
Sponsors in the lower middle market
Deals below roughly ten to fifteen million of EBITDA, where regional bank senior caps out and unitranche is not accessible. Our tranche is the difference between winning the auction and writing the memo about why you passed.
Independent and fundless sponsors
You are equity-constrained by construction. Contingent mezzanine is most useful exactly here — and we are comfortable underwriting a deal before a fund exists behind it.
Add-on-heavy platforms and rollups
Where the same back office gets bought ten times, the transformation compounds across the platform. We will finance the programme, not just the deal in front of you.
Startups buying their way into a market
Venture-backed companies acquiring services businesses can rarely raise acquisition debt at all. We write convertible junior notes at the acquisition vehicle so the operating company can be financed without wrecking the cap table above it.
MGAs and specialty distribution
Carrier concentration means less senior leverage than the earnings deserve. Insurance distribution is our first vertical and the place our underwriting is deepest.
Also in scope
Adjacent paper we are happy to write.
Streamlined acquisition paper
A limited-diligence instrument for small brokerage and agency acquisitions — closer to a SAFE than to a hundred-page purchase agreement, for deals where the legal bill would otherwise eat the thesis.
Transformation-linked seller notes
AI materially improves producer profitability, which means a seller note can be larger and safer than the trailing numbers suggest. We will structure and, where it fits, participate.
Send us the deal where price is the problem.
We will come back with an indicative structure and the workflow inventory the sizing rests on.