Is a Private Equity Club Deal Coming to a Pension Fund Near You?
Partnerships between private equity firms to buy large enterprises have historically turned out very badly.
Kristoffer Tripplaar/Sipa USA via AP Images
Medline Industries, the nationâs largest manufacturer and distributor of medical supplies to hospitals and doctorsâ offices, is about to become entangled in a private equity club deal.
One way that private equity (PE) firms have historically been able to take on larger and larger companies is through the use of so-called âclub deals.â This refers to when two or more private equity funds join together to acquire a huge enterprise, and share ownership. Once a more common structure, club deals have declined from more than 40 percent of all leveraged buyouts (LBOs) (not including add-ons) in 2004 to just 20 percent in 2018. Burned by past agreements that promised high returns but ended in distress or bankruptcy, pension funds and other limited partner