Private Equity Accused of Conspiring

October 11, 2012

Private equity firms are once again the center of criticism over alleged bid rigging in some high profile private equity buyouts.  A complaint filed in a Boston court was recently made public and alleges that private equity firms worked together in a way that allowed some of the largest buyout firms to coordinate bids in a noncompetitive way.  The plaintiffs, a group of former shareholders of public companies, argue that they were deprived of billions of dollars because the bidding was not competitive and thus the prices paid for the companies were artificially depressed.

Emails that were recently made public suggest that there was communication between executives at top private equity firms including George Roberts of KKR and Tony James of Blackstone Group in which the two appear to agree to not compete on a deal.  But there are 17 defendants in this suit and it seems a leap to the idea that all these firms were conspiring together when many competed actively and fiercely with each other in various deals, as Dan Primack notes.

This is a serious allegation and one that only adds to growing negative public perception of the industry; however, the defendants have adamantly dismissed the charges as a distortion of the common and legal private equity practice of club deals.   A KKR spokeswoman disputed the complaint saying, “The plaintiffs do not challenge the perfectly legitimate practice of club deals but instead make the preposterous claim that the entire private- equity industry came together under a master plan to decide which firms would be permitted to acquire any particular public company.”  As a side note, Bain Capital is among the defendants; the firm has been the subject of extraordinary scrutiny because of its high-profile co-founder, Mitt Romney, the Republican candidate for president.

You can read the whole suite below courtesy of Fortune, including the email exchanges between executives at top private equity firms: Conspiracy Case

tags: private equity bid rigging, private equity conspiracy, private equity conspiracy theory, private equity conspire, private equity bid rigging scandal, private equity industry, private equity competition, private equity buyouts, buyout bidding, private equity bidding law

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