Governance That Holds: What Five Years of Sponsor-Backed IPOs Tell You

For private equity sponsors, the path to a public market listing involves a series of governance decisions that shape influence long after the bell rings on day one. Our Capital Markets team has reviewed the key governance terms of 86 sponsor-backed companies that completed US IPOs between January 2021 and December 2025, each raising at least $100 million. What that data reveals is both a benchmark for what is achievable and a prompt for what you should be thinking about early.

Sponsors are retaining meaningful control — but the structure matters

The headline number is notable: 90% of the surveyed companies retained "controlled company" status under applicable listing standards following their IPO. That designation carries governance flexibility, relieving sponsors from requirements to maintain fully independent compensation or nominating and governance committees. Beyond that, sponsors are securing influence through contractual shareholder agreements that lock in board rights independent of their ownership percentage.  87% of surveyed companies granted sponsors the right to nominate or designate directors to serve on the public company's board, and 77% permitted the sponsor to designate a majority or supermajority of the board. In 26% of companies, sponsors secured the right to designate the chairperson of the board.

Controlled company status is therefore only part of the picture. The structure of your board rights, and what triggers their reduction as your ownership stake decreases, matters just as much.

Voluntary adoption of standard governance structures

One of the more notable findings from this survey is many sponsors are voluntarily adopting standard public company governance structures, even where controlled company status would exempt them from doing so. 58% of surveyed companies went public with a majority-independent board despite having no obligation to do so. Nearly all (95%) established a compensation committee, and 90% had a nominating and governance committee in place. In many cases, these choices reflect what institutional investors, proxy advisory firms and the broader market have come to expect from newly public companies, regardless of their controlled company status. At the same time, sponsors are preserving committee-level influence within these structures. In 57% of surveyed companies, the sponsor retained the right to designate at least one member of the audit committee, and in 61%, the sponsor held the same right over the compensation committee, reflecting a practical approach of meeting standard governance expectations while maintaining a seat at the table on key decisions. while preserving influence in substance.

Protective provisions are common but the details matter

Almost half (47%) of the surveyed companies with shareholder agreements in place gave sponsors consent or veto rights over key corporate actions following the IPO — including acquisitions and dispositions above certain thresholds, changes to board size and composition, change-of-control transactions, debt incurrence above a defined level, and charter amendments. In the majority of cases where veto rights were granted (86%), the sponsor owned at least 50% of the outstanding shares at the time of the IPO.

These provisions operate through the sponsor's stockholder capacity rather than its board position — a distinction worth noting because stockholder-based rights can be structured to survive changes in board composition. Getting the scope right at the outset, including the thresholds that trigger these rights and how they evolve as ownership decreases, is important. 

Shareholder rights: structured for sponsors, with built-in sunset provisions

93% of surveyed companies permitted stockholder action by written consent, which is a departure from standard public company practice. 84% permitted shareholders to call special meetings. In both cases, these rights are structured for sponsor use and typically sunset once sponsor ownership falls below a defined threshold. Similarly, 77% of surveyed companies have a springing supermajority requirement for charter amendments, which takes effect once the sponsor's voting power decreases to a certain level.

The key planning consideration is that these rights are designed to work within a specific ownership window. As ownership decreases through secondary sales, the governance framework shifts, and understanding how and when that happens is an important part of structuring the IPO terms.

Structural choices that are worth considering early

27% of the surveyed companies used an Up-C structure, allowing pre-IPO sponsors to retain economic interests in a pass-through entity partially owned by the public company. Through a Tax Receivable Agreement, the public company typically pays pre-IPO owners a negotiated percentage — usually 85% — of the federal and state tax benefits generated by the resulting tax basis step-up. 

12% of surveyed companies had dual-class share structures at the time of IPO, while the remainder had a single class of stock or multiple classes with no vote differentials. Of the companies with high-vote/low-vote dual-class structures, nine out of ten were founder-led, reflecting that dual-class structures remain relatively uncommon in pure sponsor-backed IPOs.

Planning Ahead

These structural decisions have long lead times and downstream consequences for governance, liquidity and public market reception. The data from five years of sponsor-backed listings makes clear both what is achievable and where the market has settled. 

If you are considering your path to market, these benchmarks are a useful reference point. If you are interested in going deeper, access the full report or reach out to the authors or your usual Freshfields contact.
 

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