Club deal
Encyclopedia
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 firm
s 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 fund
s. 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 investor
s that invest as limited partners in private equity fund
s 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-investment
s alongside the leading financial sponsor.
Leveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
or other private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
investment that involves several different private equity investment firms
Private equity firm
A private equity firm is an investment manager that makes investments in the private equity of operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital...
. Club deal can also be referred as syndicated investment.
In a club deal, the investor group of private equity firm
Private equity firm
A private equity firm is an investment manager that makes investments in the private equity of operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital...
s 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 fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
s. 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 investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
s that invest as limited partners in private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
s 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-investment
Equity co-investment
An equity co-investment is a minority investment, made directly into an operating company, alongside a financial sponsor or other private equity investor, in a leveraged buyout, recapitalization or growth capital transaction. In certain circumstances, venture capital firms may also seek...
s alongside the leading financial sponsor.
Examples
Among the most notable of the large club deals completed were the following:- Houghton MifflinHoughton MifflinHoughton Mifflin Harcourt is an educational and trade publisher in the United States. Headquartered in Boston's Back Bay, it publishes textbooks, instructional technology materials, assessments, reference works, and fiction and non-fiction for both young readers and adults.-History:The company was...
, 2002 - Acquired by a consortium of Bain CapitalBain CapitalBain Capital LLC is a Boston-based private equity firm founded in 1984 by partners from the consulting firm Bain & Company. Originally conceived as an early-stage, growth-oriented investment fund, Bain Capital today manages approximately $65 billion in assets, and its strategies include private...
, the Blackstone GroupBlackstone GroupThe Blackstone Group L.P. is an American-based alternative asset management and financial services company that specializes in private equity, real estate, and credit and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions ,...
and Thomas H. Lee PartnersThomas H. Lee PartnersThomas H. Lee Partners is a private equity firm based in Boston, Massachusetts specializing in leveraged buyouts, growth capital, special situations, industry consolidations, and recapitalizations....
- SunGardSunGardSunGard is a multinational company based in Wayne, Pennsylvania, which provides software and services to education, financial services, and public sector organizations. It was formed in 1983, as a spin-off of the computer services division of Sun Oil Company, during a period of low crude oil...
, 2005 - Acquired by a consortium of seven private equity investment firms led by Silver Lake PartnersSilver Lake PartnersSilver Lake is a US-based private equity firm focused on leveraged buyout and growth capital investments in technology, technology-enabled and related industries...
(Bain CapitalBain CapitalBain Capital LLC is a Boston-based private equity firm founded in 1984 by partners from the consulting firm Bain & Company. Originally conceived as an early-stage, growth-oriented investment fund, Bain Capital today manages approximately $65 billion in assets, and its strategies include private...
, the Blackstone GroupBlackstone GroupThe Blackstone Group L.P. is an American-based alternative asset management and financial services company that specializes in private equity, real estate, and credit and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions ,...
, Goldman Sachs Capital PartnersGoldman Sachs Capital PartnersGoldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally....
, KKR, Providence Equity PartnersProvidence Equity PartnersProvidence Equity Partners is a global private equity investment firm focused on media, entertainment, communications and information investments...
, and Texas Pacific GroupTexas Pacific GroupTPG Capital is one of the largest private equity investment firms globally, focused on leveraged buyout, growth capital and leveraged recapitalization investments in distressed companies and turnaround situations. TPG also manages investment funds specializing in growth capital, venture capital,...
)
- Freescale SemiconductorFreescale SemiconductorFreescale Semiconductor, Inc. is a producer and designer of embedded hardware, with 17 billion semiconductor chips in use around the world. The company focuses on the automotive, consumer, industrial and networking markets with its product portfolio including microprocessors, microcontrollers,...
, 2006 - Acquired by a consortium led by the Blackstone GroupBlackstone GroupThe Blackstone Group L.P. is an American-based alternative asset management and financial services company that specializes in private equity, real estate, and credit and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions ,...
and including the Carlyle GroupCarlyle GroupThe Carlyle Group is an American-based global asset management firm, specializing in private equity, based in Washington, D.C. The Carlyle Group operates in four business areas: corporate private equity, real assets, market strategies and fund-of-funds, through its AlpInvest subsidiary...
, PermiraPermiraPermira is a United Kingdom-based private equity firm with global reach. The firm advises funds with a total committed capital of approximately €20 billion....
and TPG Capital)
- HCAHospital Corporation of AmericaHospital Corporation of America is the largest private operator of health care facilities in the world, It is based in Nashville, Tennessee and is widely considered to be the single largest factor in making that city a hotspot for healthcare enterprise.-History:The founders of HCA include Jack C....
, 2006 - Acquired by a consortium of KKR, Bain CapitalBain CapitalBain Capital LLC is a Boston-based private equity firm founded in 1984 by partners from the consulting firm Bain & Company. Originally conceived as an early-stage, growth-oriented investment fund, Bain Capital today manages approximately $65 billion in assets, and its strategies include private...
, Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
and the Frist family
- Kinder MorganKinder MorganKinder Morgan, Inc. is an American energy company. It is also, through a subsidiary, the general partner of and owner of many of the interests in Kinder Morgan Energy Partners, a publicly traded pipeline and terminal limited partnership....
, 2006 - Acquired by a consortium including Goldman Sachs Capital PartnersGoldman Sachs Capital PartnersGoldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally....
, the Carlyle GroupCarlyle GroupThe Carlyle Group is an American-based global asset management firm, specializing in private equity, based in Washington, D.C. The Carlyle Group operates in four business areas: corporate private equity, real assets, market strategies and fund-of-funds, through its AlpInvest subsidiary...
and Riverstone HoldingsRiverstone HoldingsRiverstone Holdings is a private equity firm focused on leveraged buyout and growth capital investments in the energy and power sectors. The firm focuses on oil and gas exploration, midstream pipeline, electric generation, energy and power services as well as energy and power technology...
together with co-founder Richard KinderRichard KinderRichard Kinder is the CEO and Chairman of the Board of Kinder Morgan Energy Partners, an energy and pipeline corporation.-Biography:...
- NXP Semiconductors, 2006 - Acquired by a consortium of KKR, Silver Lake PartnersSilver Lake PartnersSilver Lake is a US-based private equity firm focused on leveraged buyout and growth capital investments in technology, technology-enabled and related industries...
and AlpInvest PartnersAlpInvest PartnersAlpInvest Partners is a private equity investment manager and at the end of 2009 globally managed over €42 billion ....
- BiometBiometBiomet, Inc. is one of the world leading medical device manufacturer located in the Warsaw, Indiana business cluster. The company specializes in reconstructive products for hips, knees and shoulders, fixation devices, orthopedic support devices, dental implants, spinal implants and operating room...
, 2007 - Acquired by a consortium including the Blackstone GroupBlackstone GroupThe Blackstone Group L.P. is an American-based alternative asset management and financial services company that specializes in private equity, real estate, and credit and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions ,...
, KKR, TPG Capital and Goldman Sachs Capital PartnersGoldman Sachs Capital PartnersGoldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally....
- TXUTXUEnergy Future Holdings Corporation is an electric utility company headquartered in Energy Plaza in Downtown Dallas, Texas, United States. The company was known as TXU until its $45 billion leveraged buyout by Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs...
, 2007 - Acquired by a consortium including KKR, TPG Capital and Goldman Sachs Capital PartnersGoldman Sachs Capital PartnersGoldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally....