Club deals present an attractive opportunity for private equity funds to aggregate their purchasing power to bid on large transactions that a single private equity fund, by virtue of fund size, concentration limits or otherwise, might not individually be able to complete. In addition, by participating in a consortium, each member fund is able to share the risk of the transaction in a manner to better fit within an individual fund’s desired level of exposure to a particular industry or asset class.
However, club deals present a host of issues that typically do not arise in the context of a single fund acquisition, including determinations related to the process of and control over the auction and bidding process and the allocation of any breakup fee exposure or transaction expenses among club members. In addition, in the event that the club is successful in bidding for the target, the club members must consider a variety of issues related to the governance and control of the target company following closing, including matters related to board control, minority investor protections, transfer matters and the process and timing of exit transactions.
Mayer Brown’s private equity team has extensive experience representing consortiums and individual club members. Based upon this broad experience, we seek to assist our private equity clients with developing practical solutions to the unique issues and risks that face participants in club transactions.