What is a club deal?

Club deals are most common in large take-privates and buyouts where the equity check exceeds what one fund can hold under its concentration limits. Sponsors usually sign a consortium or co-investment agreement covering governance, voting, and exit rights. Often confused with co-investment, where LPs rather than other sponsors join a deal, and with a consortium bid, which describes the bidding stage.

Say three firms buy a company for $3 billion. Each puts in $400 million of equity and borrows the rest, and all three sit on the company’s board.

It lets firms buy companies bigger than any would take alone, and spreads the risk of a single deal.