The total value of UK private equity club deals hit GBP19.7 billion last year, a fourfold increase from the GBP4.5 billion last year, says Pinsent Masons, the multinational law firm
The number of these ‘club deals’ has reached a three-year high (see graph below) – there were 56 deals last year, up 30 per cent from 43 the year before. A ‘club deal’ is when two or more private equity or trade buyers jointly acquire a company. One of the biggest club deals of recent years was the GBP6.8 billion acquisition of ASDA, in October last year by the Issa brothers and TDR Capital.
Alasdair Weir, Partner at Pinsent Masons, says by pooling their fire power, club deals allow groups of investors to buy bigger targets and share risk. In some cases this can reduce the amount of leverage needed, allowing deals to be equity funded more quickly and with more certainty.
The impact of Covid-19 on the economy has caused some lenders to exercise more caution on leveraged buyouts in those sectors most affected by the lockdown. By increasing the equity slice, club deals allow buyers to use lower levels of debt financing. Sellers will typically look more favourably on a purchaser that does not have to arrange a large debt financing.
Source: Private Equity Wire
