US court widens collusion probe of 2005-2007 mega deals
The mega “club deals” between some of the big global buyout firms during the 2005-2007 boom period have been put under wider scrutiny in a US antitrust lawsuit. The four-year-old case accuses 11 firms, including Blackstone Group and KKR, of colluding to drive down the prices of these joint transactions. Initially the case was limited to 17 deals, but a Federal District Court judge has ruled that plaintiffs can information about 10 additional buyouts, The New York Times reported.
Transactions now subject to investigation include the acquisitions of Harrah's Entertainment, Univision, Clear Channel and Toys "R" Us, as well as the largest buyout ever seen - the $44 billion takeover of TXU by a Goldman Sachs and KKR-led consortium. Deals already involved in the case include SunGard Data Systems and Freescale Semiconductor, which were purchased by seven and four different private equity firms, respectively.
Lawyers defending the private equity firms argue that the case is "a far-fetched theory by doing nothing more than describing routine M&A activity, and labeling it anticompetitive." They stress that many of the largest buyouts came out of bidding wars that pushed up prices.
Regardless of the legal action, large-scale buyout activity continues unabated, albeit not reaching the highs of four years ago. Most of the major buyout firms are expected to hit the fundraising trail before the end of the year, the first time many have tapped the market for large sums of money since before the global financial crisis.
The Carlyle Group, Bain Capital, KKR, Warburg Pincus, Vestar Capital, Thomas H. Lee Partners, Apax Partners, Permira, EQT Partners and BC Partners are among those tipped to seek investment alongside a host of leading venture capital players. Market sources tell AVCJ that the buyout firms could target well in excess of $100 billion - Warburg Pincus alone is said to be preparing a $12 billion fund now that the $15 billion it raised for its last buyout vehicle in 2008 is nearly exhausted.
Prequin estimates that global fundraising could reach $300 billion in 2011, with 341 vehicles having secured $160.7 billion as of mid-August. A total of 1,721 funds are believed to be in the process of fundraising, with a collective target of $692 billion.
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