LONDON – Private equity firms Blackstone Group, KKR & Co., Bain Capital Partners, Carlyle Group and others have been accused of agreeing not to compete with each other in recent buyout deals, according to reports about a civil antitrust lawsuit.
One of the e-mail trails cited as evidence indicated that Blackstone and KKR executives appeared to agree not to compete in the buyout of Freescale Semiconductor in 2006, according to a Bloomberg report.
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E-mails were also cited to support allegations that 11 of the largest private equity firms engaged in anti-competitive practices in 19 leveraged buyout deals and eight other transactions. The plaintiffs include former shareholders of the acquired companies, reports said.
Blackstone led a consortium of private equity firms that took Freescale private in September 2006, purchasing the former Motorola chip unit for $17.6 billion. Blackstone invested $1.2 billion in the deal.
While Blackstone helped structure the Freescale buyout, both Blackstone and Carlyle Group later wrote off 85 percent of the value of their holdings in Freescale.
In another deal, KKR teamed with Silver Lake Partners, Bain Capital and others to buy an 80 percent stake in NXP in August 2006 for 6.4 billion euros (about $8 billion). As with the Freescale deal, the value of NXP plummeted in 2008. In March 2009, KKR wrote down its holding in NXP to 10 percent of the purchase price.
It is not known whether the leveraged buyout of NXP is among the deals ensnared in the antitrust lawsuit.
The antitrust case focuses on whether private equity companies colluded to form consortia to bid on a buyouts as a way to avoid competition.
I would be willing to bet the write off is accounting 'magic' or an attempt to derail the investigation. The private equity almost always get their pound of flesh and leave the 'surviving' company they spin out drowning in debt.
Their normal MO is buy low, sell anything of value and slash expenditures by closing facilities they can't liquidate quickly while collecting huge 'management fees' to extract capital. With the 'new and improved' balance sheet, the company borrows money to make their 'investor' whole and finally have a new IPO or sell to a lower class of private equity vampires.
Research the destruction of Simmons, the largest bedding company in the US. This is the case study for how a series of 7 private equity deals decimated a company.
30 years hard labor for all Blackstone Group, KKR & Co., Bain Capital Partners, Carlyle Group excecutives and their lawyers at once. They are the leaders behind the demise of the USA and the manufacturing industry here.
I am no lawyer but I understand that a non-compete deal or cartel formation is considered illegal under U.S. antitrust law.
But it does remain the case that the private equity companies' bad timing for investing in 2006 and writing off in 2009 is probably their best defense, and may get them off the hook.
The case against would argue that the various leveraged buy deals were worth more than the amount paid IN 2006 and that the PE companies would have paid more but for the alleged collusion.
In other words the case against would argue that the PE companies are guilty AND incompetent.