A club deal brings a small group of investors together in a single transaction. When it works, it opens up deals none of them would do alone. When it fails, it is almost always because the investors were never aligned.
A club deal is a transaction in which a small group of investors — families, entrepreneurs, family offices, sometimes a fund — join forces to buy a company, a hotel or a property that none of them would buy alone. There is no fund with fixed rules: each deal has its own structure, its own investors and its own horizon.
The model is not new, and it has grown in recent years because it answers two needs at once. Private investors want direct access to assets, without the fees and lack of control of a fund. And many mid-sized deals are too large for a single investor and too small for the big funds.
Why choosing partners is the most important decision
In a club deal, the quality of the asset is necessary but not sufficient. Most deals that go wrong do not fail because the asset is bad: they fail because the investors wanted different things and only found out when a decision had to be made.
The most frequent misalignments are four:
- Horizon. One investor wants to exit after three years; another is willing to stay ten. When an offer arrives in year four, the group splits.
- Expected return. Some want regular income; others accept receiving nothing for years in exchange for a larger gain on exit.
- Capacity to follow on. If the asset needs more capital, not everyone has the same means. Those who cannot follow are diluted, and that creates friction.
- Involvement. Some investors want to take part in management decisions; others only want quarterly reports. Mixing the two profiles without rules is a recipe for conflict.
How to select co-investors
Selection starts before the deal is shown to anyone. Whoever structures the club deal should define, in writing, the investor profile they are looking for and only then approach those who fit it. The questions to ask each potential co-investor are simple and direct:
- What is your investment horizon for this type of asset?
- Do you need income during the holding period, or can you accept capital growth only?
- Can you take part in a capital increase, and up to what amount?
- What role do you want in decisions — board, investment committee, or information only?
- In what circumstances would you want to sell before the planned date?
Vague answers to these questions are, in themselves, an answer.
The structure that protects the group
Even with aligned investors, circumstances change. That is why a well-built club deal has a shareholders’ agreement that deals with the difficult situations up front:
- Reserved matters requiring a qualified majority — sale of the asset, new borrowing, entry of new investors.
- Pre-emption rights when an investor wants to sell their position.
- Tag-along and drag-along, so that minorities can join a sale and a majority can sell the whole.
- Rules for capital increases and for the dilution of those who do not follow.
- Periodic reporting with defined content and deadlines.
The role of the organiser
In a club deal, someone has to find the asset, negotiate the purchase, select the investors, set up the structure and follow the investment through to exit. That role requires independence: the organiser should be on the side of the group, not the seller of the asset, and their remuneration should depend mainly on the success of the deal.
GestInvest organises club deals and co-investments in companies, hospitality and real estate for a select network of investors in Europe, the Gulf and Brazil. Read more about our investments and about private investment access.
Frequently asked questions
What is the minimum investment in a club deal?
It varies with the deal. In mid-sized transactions, individual tickets usually range from a few hundred thousand to a few million euros.
What is the difference between a club deal and a fund?
In a fund, the investor commits capital without knowing which assets it will go into. In a club deal, they decide deal by deal, know the asset and take part in the structure.
How do you exit a club deal?
Usually through the sale of the asset at the end of the agreed horizon. Before that, an investor can sell their position, respecting the other investors’ pre-emption rights.
