Private Equity Antitrust Victory for Plaintiffs

On March 13, 2013, a federal court in Boston largely denied defendants’ motion for summary judgment, allowing the case to proceed against 11 private equity firm defendants accused of suppressing competition in large leveraged buyouts (“LBOs”).

Defendants Kohlberg Kravis Roberts & Company, L.P. (“KKR”), Bain Capital Partners, LLC, The Blackstone Group, and eight other of the world’s largest private equity firms are accused of conspiring to suppress the prices paid to shareholders in LBOs. An LBO is a financial transaction in which purchasers, in this case 11 private equity firms, acquire substantially all of a target company’s outstanding shares using some of their own capital along with a substantial amount of debt financing. The purchaser then typically takes the company private (by withdrawing its shares from the public trading exchange), operates it for a period of time, and sells it or conducts an IPO whereby the company stock is again introduced to a public trading exchange. At issue in this case are 19 LBOs that occurred during the 2003-2007 time period, which were each valued at more than $2.5 billion, as well as certain other LBO-related transactions in which the defendants engaged in anti-competitive conduct.

Some of the largest LBOs in history are at issue in this action, including the $45 billion TXU, $32 billion HCA, and $17 billion Freescale LBOs. The evidence in the case shows that when a group of private equity firms agreed to buy a public company through an LBO, not once did any other private equity firm submit a bid to buy the company or compete in any way. In some instances, the other private equity firms had actually valued the target company at a much higher price than the going private price, but still declined to submit a bid to “jump” the deal.

“The court found that the defendants’ internal statements that ‘no one in private equity ever jumps an announced deal,’ in combination with other evidence showing for example that no announced deals for the proprietary transactions at issue were ever ‘jumped,’ tended to show that such conduct was the practice in the industry during this time period,” said Robbins Geller’s primary litigator in the case, partner David W. Mitchell.

The court issued its ruling after holding a two-day summary judgment hearing in late December 2012. The case is pending in the District of Massachusetts before U.S. District Judge Edward F. Harrington. Robbins Geller attorneys prosecuting this action include David W. Mitchell and Randi D. Bandman.

Dahl v. Bain Capital Partners, LLC, 937 F. Supp. 2d 119 (D. Mass. 2013).