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Judge rejects ‘overarching conspiracy’ between world’s top private equity firms

14 Mar 2013

law-gavel-judge-court-crimeClaims of an overarching conspiracy between some of the world’s biggest private equity firms have been rejected by a US judge despite several individual claims of collusion being allowed to continue.

More than ten private equity heavyweights including Blackstone, Carlyle Group and KKR were sued by shareholders in 27 companies who claim they lost out on more than $1bn due to anti-competitive action during takeovers.

TPG Capital, Bain Capital and the private equity arm of Goldman Sachs were also named in the lawsuit, which covers deals made at the height of the buyout boom between 2003 and 2007.

US District Judge Edward Harrington said, “The evidence of each specific transaction, including defendants’ communications with each other, for the most part, fails to connect to a ‘larger picture’ of an overarching conspiracy.

“While some groups of transactions and defendants can be connected by ‘quid pro quo’ arrangements, correspondence, or prior working relationships, there is little evidence in the record suggesting that any single interaction was the result of a larger scheme,”

Claims against JPMorgan Chase, which took on financing and advisory work in some of the deals, were dismissed by Harrington due to lack of evidence.

But he said investors were free to pursue claims of “jumping” in which firms agreed not to outbid each other once news of agreed deals was announced.

He said investors could also continue a claim of a bid-rigging conspiracy in the $32bn buyout of hospital operator HCA led by KKR and Bain Capital in 2006.

Among emails supplied as part of the case by investors was one purportedly sent by Blackstone president James to George Roberts – the ‘R’ in KKR – following Blackstone’s decision not to bid for HCA.

In it James said, “We would much rather work with you guys than against you.

“Together we can be unstoppable but in opposition we can cost each other a lot of money.

“I hope to be in a position to call you with a large exclusive PTP [public to private] in the next week or 10 days.”

The lawsuit says Roberts replied simply with the word “agreed.”

Other deals cited by the lawsuit include the 2005 takeover of SunGard Data Systems by a consortium of firms comprising Bain Capital, Blackstone, Goldman Sachs Capital Partners, KKR, TPG, Providence Equity Partners and Silver Lake Partners.

TPG co-founder James Coulter allegedly sent an email which said being aggressive in the SunGard deal would make enemies “while perhaps benefiting no one but the (company’s) shareholders”, the filing shows.

The case is Dahl et al v. Bain Capital Partners LLC et al, U.S. District Court, District of Massachusetts, No. 07-12388.

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