Club Deal

AAA

DEFINITION of 'Club Deal'

A private equity buyout or the assumption of a controlling interest in a company that involves several different private equity firms. This group of firms pools its assets together and makes the acquisition collectively. The practice has historically allowed private equity to purchase much more expensive companies together than they could alone. Also, with each company taking a smaller position, risk can be reduced.

BREAKING DOWN 'Club Deal'

While club deals have grown in popularity in recent years, there are many issues that can arise related to regulatory practices, conflicts of interest and market-cornering. For example, there are concerns that club deals decrease the amount of money that shareholders receive, as a group of private equity firms has fewer parties to bid against.

There are some private-equity firms that do not engage in club deals as a rule, but the choice is up to the firm and the wishes of the limited partners who make most of the big money decisions within those firms. As with many large private equity deals, the main objective is to fix up and then dress up the acquisition for future sale to the public.

RELATED TERMS
  1. Syndicate

    A professional financial services group formed temporarily for ...
  2. Private Equity

    Equity capital that is not quoted on a public exchange. Private ...
  3. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount ...
  4. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  5. Syndicated Loan

    A loan offered by a group of lenders (called a syndicate) who ...
  6. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
Related Articles
  1. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  2. Professionals

    Tips on Building a Resume for a Private Equity Job

    Trying to land a job in the coveted private equity sector? Ensure your resume meets the stringent PE job requirements with these important tips.
  3. Active Trading Fundamentals

    The 4 Biggest Private Equity Firms in London

    Discover information about the largest private equity firms that are headquartered in London, ranked by total assets under management.
  4. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  5. Active Trading Fundamentals

    The Biggest Private Equity Firms in San Francisco

    Learn about some of the larger private equity firms with a presence in San Francisco, including KKR, the Blackstone Group and Warburg Pincus.
  6. Active Trading Fundamentals

    The Biggest Private Equity Firms in Los Angeles

    Learn why Los Angeles is a thriving market for private equity, and identify the five largest private equity firms operating in the city.
  7. Stock Analysis

    5 Reasons Thoratec Corp. Keeps Impressing Investors

    Learn about Thoratec Corporation and its position in its industry. Understand five key factors why the company has impressed investors.
  8. Markets

    Trader Joe's Stock Doesn’t Exist. Here’s Why

    Learn about Trader Joe's and how it operates. Understand why Trader Joe's has chosen not to be a public company and why it should remain that way.
  9. Mutual Funds & ETFs

    ETF Analysis: PowerShares Global Listed Private Eq

    Learn more about the PowerShares Global Listed Private Equity Portfolio, a private equity-based exchange-traded fund, or ETF.
  10. Entrepreneurship

    Top 10 Startups That Emerged in Chicago

    Understand why Chicago has become one of the best places to work or start a new business. Learn about the top 10 startups in Chicago.
RELATED FAQS
  1. What is the difference between a merger and a takeover?

    In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions - they combine two previously ... Read Full Answer >>
  2. What's the difference between publicly- and privately-held companies?

    Privately-held companies are - no surprise here - privately held. This means that, in most cases, the company is owned by ... Read Full Answer >>
  3. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  4. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  5. What does residual value represent in a private equity investment?

    It is common to see a private equity investment's net asset value, or NAV, referred to as its residual value, since it represents ... Read Full Answer >>
  6. How much, if any, influence do non-controlling interest shareholders have?

    Non-controlling interest shareholders do not typically have much influence. The level of influence can vary, however, depending ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!