Private Equity

“Club deals may allow weaker firms with no independent deal flow to stay in business simply from “piggybacking” on the deals of other private equity firms.” - Why is this listed as a *disadvantage* of club deals? I only see all sorts of advantages in this!

Depends on your perspective. An efficient market should weed out weak competitors. Club deals provide investors with misleading information about the management skill and sourcing abilities of the weaker firm.

Makes sense - Thanks ATH!

ATH is right on 1. too many cooks spoil the broth. One of the key benefits of PE (or so PE would like to think) is that PE people can come in an improve companies by giving expertise and management to companies that they by. While Club deals are good in that they allow pooling of capital and diversification to an extent, we don’t see the benefit of superior PE firms coming in and actively changing the company by being activist shareholders. What you get instead is a lot of small timers who don’t have much to contribute other than some cash. It’s political.

Makes perfect sense again… thx!