Collusion in Private Equity

I’m shocked! Shocked! Private equity firms (and VCs too) sometimes “work together” in doing deals. Given that the N.Y. Times is running a business section piece on the subject this weekend, I’m apparently not in the majority in thinking that everyone knew private equity firms often talk while putting together deals.

Among Wall Street’s swashbuckling buyout kings, not many words are off limits. But with private equity firms teaming up to go after bigger prey, one dirty word has become unspeakable. It is collusion.

Virtually any big company that puts itself up for auction these days is deluged with interest from private equity firms, which have too much money and too little time to spend it. Witness the $15 billion sale of Ford’s Hertz rental car unit to a consortium of private equity players including Clayton, Dubilier & Rice Inc., the Carlyle Group and Merrill Lynch Global Private Equity. Or the $11.3 billion sale of SunGard to a supersized group of seven buyout firms led by Silver Lake Partners. What has gone largely unquestioned is whether the formation of these consortiums of firms, or “clubs” in industry parlance, has the potential to artificially depress buyout prices and hurt corporate shareholders.

Related posts:

  1. Festishistic U.K. Fascination with Private Equity
  2. The Brain Drain — to Private Equity
  3. LPs Offer Private Equity Pecking Order
  4. Jack Welch, Scary Private Equity Guy
  5. Contrarian Thinking on Buyouts and VC