February 2, 2022
Private Equity: The Return of Club Deals?
Wachtell Lipton recently published a memo previewing M&A in 2022. One of the interesting points raised in the memo is the possible return of “club deals,” which were popular prior to the financial crisis but have been less common since then. Here’s what the memo has to say about club deals in 2022:
Looking ahead, one trend to watch for is a possible resurgence of PE club deals (where two or more firms band together to buy a company), which had fallen out of favor following the 2008 financial crisis, but which may be coming back as PE firms look for opportunities to deploy significant capital in transactions involving large targets while strategic buyers face potential regulatory constraints. Indeed, 2021 witnessed the largest buyout involving a club of PE firms since the financial crisis, with the acquisition of Medline by Blackstone, Carlyle and Hellman & Friedman.
Further, major PE players are planning additional capital raises projected to result in record-size funds and unprecedented levels of dry powder. Among many others, Blackstone and Apollo are reportedly preparing for major fundraising efforts (with Blackstone reportedly planning to target as much as $30 billion). We expect that sponsors will continue to pursue acquisitions and actively look for creative opportunities, with PE activity boosted by access to
financing, as well as by a greater availability of potential targets as regulatory concerns cause hesitation among strategics and activists continue to prod companies to become more focused on just their core businesses.
The memo covers a lot of ground. In addition to this nugget on private equity, it addresses M&A trends across a variety of industries, cross-border deals, the impact of the evolving antitrust environment, ESG activism and M&A, and acquisition financing, among other topics.
– John Jenkins