Three major equity firms to settle collusion lawsuit

Kohlberg Kravis Robert, the Blackstone Group and TPG to pay a combined $325 million

Three of the largest private equity firms in the U.S. have agreed to settle a seven year old lawsuit that accuses them of conspiring to drive down the price of takeover targets. Kohlberg Kravis Robert, the Blackstone Group and TPG have revealed on Aug 7 that they will pay a combined $325 million, the New York Times reports that the details of the settlement were finalized in late July, but had been kept quiet until the announcement.

The lawsuit, which was filed in 2007, alleged that seven high powered private equity firms  acted as unofficial partners, colluding to drive down the cost of valuable corporate targets. Emails citied in the suit indicate that the private equity firms involved would agree not to bid on certain target as part of a larger understanding, effectively reducing competition for the deals.

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Of the seven group originally cited in the lawsuit, six have now settled. Prior to this announcement, Bain Capital, Silver Lake and Goldman agreed to pay a combined $150.5 million. The Carlyle group is now the lone holdout of the seven. The New York Time reports that a spokesman for Carlyle said in an emailed statement that, “These claims are without merit and we will continue to vigorously contest the allegations.”

The plaintiffs included pension funds in Detroit in Omaha, as well as a handful of shareholders who dumped stocked following the private equity buyouts affected.

That may be true, but as the other defendants await approval for the settlement, the pressure will continue to mount. In September, a Massachusetts federal district court judge will decide whether the settlements get approved, and more importantly whether or not it could be considered for class action.

Should it be the only one of the groups to go to trial, the Carlyle Group could be responsible for a disproportionate amount of damages for its part in the alleged collusion. 

Managing Editor

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Chris DiMarco

Chris DiMarco, Managing Editor of InsideCounsel magazine, has a background in multimedia production with previous involvement in projects in which he developed and created content for...

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