Club deal

A club deal, in finance, refers to a leveraged buyout or other private equity investment that involves several different private equity investment firms. Club deal can also be referred as syndicated investment.

In a club deal, the investor group of private equity firms pools its assets together and makes the acquisition collectively. The practice has historically allowed private equity to purchase larger and more expensive companies than each constituent firm could potentially acquire through its own private equity funds. Additionally, by syndicating the equity ownership across a group of investment firms, each firm reduces its concentration and is able to maintain the diversification of its portfolio of investments.

Institutional investors that invest as limited partners in private equity funds often criticize the practice of club deals that result in holdings in the same investment through different funds. Large limited partners have often preferred to support large leveraged buyouts through equity co-investments alongside the leading financial sponsor.^[1]

Examples

Among the most notable of the large club deals completed were the following:

• Houghton Mifflin, 2002 - Acquired by a consortium of Bain Capital, the Blackstone Group and Thomas H. Lee Partners^[2][3]

• SunGard, 2005 - Acquired by a consortium of seven private equity investment firms led by Silver Lake Partners (Bain Capital, the Blackstone Group, Goldman Sachs Capital Partners, KKR, Providence Equity Partners, and Texas Pacific Group)^[4]

• Freescale Semiconductor, 2006 - Acquired by a consortium led by the Blackstone Group and including the Carlyle Group, Permira and TPG Capital)^[5]

• HCA, 2006 - Acquired by a consortium of KKR, Bain Capital, Merrill Lynch and the Frist family^[6]

• Kinder Morgan, 2006 - Acquired by a consortium including Goldman Sachs Capital Partners, the Carlyle Group and Riverstone Holdings together with co-founder Richard Kinder^[7]

• NXP Semiconductors, 2006 - Acquired by a consortium of KKR, Silver Lake Partners and AlpInvest Partners^[8]

• Biomet, 2007 - Acquired by a consortium including the Blackstone Group, KKR, TPG Capital and Goldman Sachs Capital Partners^[9]

• TXU, 2007 - Acquired by a consortium including KKR, TPG Capital and Goldman Sachs Capital Partners^[10]

See also

• Private equity in the 21st century
• Leveraged buyout
• Equity co-investment

References

1. ^ Limited partnership co-investment or GP club deals?. Real Deals, 2007
2. ^ SUZANNE KAPNER AND ANDREW ROSS SORKIN. "Market Place; Vivendi Is Said To Be Near Sale Of Houghton." New York Times, October 31, 2002
3. ^ "COMPANY NEWS; VIVENDI FINISHES SALE OF HOUGHTON MIFFLIN TO INVESTORS." New York Times, January 1, 2003.
4. ^ "Capital Firms Agree to Buy SunGard Data in Cash Deal." Bloomberg L.P., March 29, 2005
5. ^ SORKIN, ANDREW ROSS and FLYNN, LAURIE J. "Blackstone Alliance to Buy Chip Maker for $17.6 Billion." New York Times, September 16, 2006
6. ^ SORKIN, ANDREW ROSS. "HCA Buyout Highlights Era of Going Private." New York Times, July 25, 2006.
7. ^ MOUAWAD, JAD. "Kinder Morgan Agrees to an Improved Buyout Offer Led by Its Chairman." New York Times, August 29, 2006.
8. ^ BLOOMBERG NEWS (2006-08-04). "TECHNOLOGY; Royal Philips Sells Unit for $4.4 Billion". New York Times. http://www.nytimes.com/2006/08/04/business/worldbusiness/04chip.html. Retrieved 2008-04-27. 
9. ^ de la MERCED, MICHAEL J. "Biomet Accepts Sweetened Takeover Offer." New York Times, June 8, 2007.
10. ^ Lonkevich, Dan and Klump, Edward. KKR, Texas Pacific Will Acquire TXU for $45 Billion Bloomberg, February 26, 2007.

• The decline of the club deal. The Deal, 2007
• Selling to the club:How a seller should negotiate a club deal. International Financial Law Review, 2007
• Do Too Many Cooks Spoil the Takeover Deal?. New York Times, 2005
• Goodbye to All That. New York Times, 2004
• Measuring the Club-Deal Discount. New York Times, 2008
• Private Equity Firms Working Together. Global Finance, 2005