What Does Club Deal Mean?
A club deal, also referred to as a syndicated investment, is a transaction where a number of private equity groups provide capital for the acquisition of a target that is larger than any one party could execute on their own. Club deals allow private equity firms to compete for acquisition targets that were once only available to larger strategic acquirers, while reducing risk exposure to any one member at the same time.
A club deal is also used to define a type of syndicated loan provided by a group of lenders on an M&A transaction.
Divestopedia Explains Club Deal
Club deals are more commonly seen on transactions north of $100 million. As a seller, it is important to understand the relationship between the parties within the club. Who is leading the acquisition? Which group will manage the transition of the business post-closing? Have the parties agreed to a strategic vision for the target going forward? What mechanisms are available for dispute resolutions amongst the club?
Although sellers might get a premium valuation from a club deal acquisition, there could also be added complexities because the seller must now negotiate with a number of different parties in the club rather than just one buyer.