A common occurrence before the 2008 financial crisis, club deals involve private equity firms teaming up for a takeover, often when acquisition prices reach into the billions of dollars. But they fell out of favor over the ensuing years, as high-profile bankruptcies like those of Energy Future and Toys R Us showed the potential downsides. So far in 2018, club deals have accounted for 20.1% of non-add-on LBOs in the US—essentially a 50% decline from the period from 2001 to 2004, when such transactions accounted for 39.8% of all non-add-on buyouts, according to a recent PitchBook analyst note.
But rumors of a pair of enormous new club deals have emerged this week. Blackstone, Hellman & Friedman, the Canada Pension Plan Investment Board and sovereign wealth fund GIC have joined together in hopes of making a takeover offer for media research giant Nielsen, according to the Financial Times. With a potential enterprise value of $17 billion, a buyout would rival the price of Blackstone's recently completed $20 billion takeover of the financial & risk business of Thomson Reuters. It would also bring Nielsen back under the ownership of Blackstone and H&F, which originally acquired the business in 2006 alongside The Carlyle Group, KKR and others in a typical pre-crisis club deal before taking the company public in 2011.
News of the Nielsen pursuit came a day after Reuters reported that Blackstone, Carlyle, CPPIB and Onex have joined up to weigh a takeover of Arconic, a Pittsburgh-based aluminum manufacturer with a market cap exceeding $11 billion. Apollo Global Management has also reportedly expressed interest, with Arconic expected to decide if it will go through with a sale by the end of the month. Both Arconic and Nielsen have been under pressure from activist investor and hedge fund Elliott Management to explore a sale.
The return of club deals makes sense for a private equity industry awash in records amount of dry powder. With those stockpiles of cash teaming with inexpensive debt to make mega-deals more and more likely, don't be surprised if firms once thought of as rivals continue to team up.
Related read: Taking a fresh look at club deals