Why Pay More When You Can Collude?

Another in a long series of "we're shocked, shocked" headlines (this one from today's New York Times): "Equity Firms Like Bain Are Depicted as Colluding".

No, really? People do that? (Full article, here)

Reporters Eric Lichtblau and Peter Lattman write that court documents indicate that, for Bain Capital's "$32.1 billion purchase of the hospital giant HCA in 2006, competitors agreed privately to 'stand down' and not bid on the company as part of an understanding with Bain to divvy up companies targeted for leveraged buyouts."

At the time, the $32.1 billion purchase price for HCA was a record.

In another example, KKR and Silver Lake Partners brought Bain into their acquisition of Philips's semiconductor business, thanks to "a secret deal whereby Bain would permit KKR and Silver Lake to submit the winning bid and then invite Bain into its deal on equal terms."

The documents are from a lawsuit filed in Boston's Federal District Court against Bain and other firms "by shareholders who say the firms' bid-rigging artificially deflated the sales price of more than two dozen companies and cost them billions of dollars."


The documents were made public, although with heavy redactions, following a motion brought by the Times.

A lawyer for the plaintiffs was quoted as saying, "I think you can tell...there is enough to show that there was very active collusion going on between the leading private equity firms."

The equity firms' executives and lawyers deny that there was collusion to drive down prices. The Times reporters quote one (anonymous) executive: "These shareholders should be grateful that we purchased their companies when we did, right before the financial crisis hit."

Grateful's not exactly the adjective I'd use....