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Which of the following statements regarding club deals is least accurate? Club deals: Select one: a....

Which of the following statements regarding club deals is least accurate? Club deals:

Select one:

a. provide a competitive opportunity for weak private equity firms

b. offer increased returns for investors

c. offer diversification benefits to participating private equity firms

d. provide an investment opportunity when private equity capital is scarce

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Answer #1

ans: a)

Club deals refers to buyouts in which private equity firms pool their contributions to acquire a company that would have been much more expensive than what they could afford with their resources. The participating firms pool their investments in small amounts and as a result , the risk on investment is reduced owing to diversification. Overall, it leads to increase in returns for the private equity players by taking a decent level of risk.

statment A is the least accurate because, not only weak private equity firms, but mid sized and large firms can also earn competitive opportunities via club deals.

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