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November 18, 2006

"Buyout firms aren't cartelizing"

Recent months have witnessed large buyouts in the US (like in the case of Harrah’s, HCA and Univision) where there was only one bidder - in the form of a syndicate of buyout firms. Now, PE Hub reports that the shareholders of some of these companies have filed a suit against the leading PE firms (including Apollo Management, Bain Capital, Blackstone Group, Carlyle Group, Clayton, Dubilier & Rice, Providence Equity Partners, Silver Lake Partners, Texas Pacific Group, T.H. Lee Partners and Warburg Pincus) accusing them of cartelizing.

Interestingly, PE Week editor Dan Primack has come out in defense of the PE firms based on a recent deal in which two syndicates competed against each other.
This class-action lawsuit has a timing problem. Namely, today’s announcement that Clear Channel Communications has agreed to be bought for around $26.7 billion (including assumed debt) by Bain Capital, Thomas H. Lee Partners and a group of its lending partners.

This was no inside job, with Bain and TH Lee coming from the outside lane to knock off the favored team of Blackstone, KKR and Providence Equity Partners. And guess what Bain, TH Lee, Blackstone, KKR and Providence all have in common, besides an interest in owning Clear Channel? They each are named as co-defendants in the conspiracy lawsuit.

Just to make my point redundantly clear: These firms are being accused of anti-competitive behavior, despite having spent the past month in fierce competition for one of the largest leveraged buyouts in history. Apparently the quid pro quo got lost in translation.

Arun Natarajan is the Founder of Venture Intelligence, which tracks private equity and venture capital in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.