Skip to Content

Private equity’s ‘anti-competitive’ problem

Is private equity guilty of collusion?

A federal judge in Boston this week caused major headaches for private equity, agreeing to expand a 4-year-old lawsuit that accuses 11 buyout firms of colluding to keep prices down on large acquisitions during the “Golden Age” of 2005-2008. The original suit had included 17 transactions, but now an additional 10 deals will be thrown into the mix.

For the record, I’ve always considered this suit to be unfounded. For example, among the deals now open to plaintiff scrutiny is Clear Channel – a transaction in which lawsuit defendants Bain Capital and THL Partners beat out a rival bid from fellow defendants Blackstone Group (BX), Kohlberg Kravis Roberts & Co. (KKR) and Providence Equity Partners. Did they simply choose not to be “anti-competitive” on this one? Or was it all an elaborate ruse to throw HCA and Harrah’s shareholders off the scent?

Moreover, the original suit argued that the acquired companies were sold below “market rates” – even though they were sold at premiums to their trading prices. This, of course, includes the massive premium for SunGard. Still waiting to see how the plaintiffs define “market price” as anything other than the price being paid by the market…

All of that said: The plaintiffs keep saying they have “smoking gun” evidence, including embarrassing emails between PE bigs, but that it remains under seal. If true, then my above skepticism is unwarranted and my gut has served me wrong (it wouldn’t be the first time). Hopefully the information will be released soon so that we can know for sure…

Here is a copy of the judge’s ruling:

[scribd id=64374438 key=key-1n56o21ys3gacb2lstat mode=list]