On The Private Equity "Don't Bid On My Deals; I Won't Bid On Yours" Collusion

Tyler Durden's picture

With 'private equity' discussions sliding for one moment off the front pages, NYTimes' DealBook notes that it appears these 'honorable' job-creating entities were allegedly colluding to drive down the prices of more than two dozen takeovers. During the last decade's buyout boom, according to newly released e-mails in a civil lawsuit accusing them of collusion, the two firms appeared to be on much cozier terms.

In September 2006, for instance, Blackstone and K.K.R. were both circling the technology giant Freescale Semiconductor. After a Blackstone group outbid a K.K.R. consortium to buy Freescale for nearly $18 billion, Hamilton E. James, the president of Blackstone, e-mailed his colleagues about Henry Kravis, the billionaire co-founder of Blackstone's rival:

"Henry Kravis just called to say congratulations and that they were standing down because he had told me before they would not jump a signed deal of ours,"

 

Mr. James wrote, two days later, in an e-mail to Mr. Kravis's cousin and co-founder, George R. Roberts. "We would much rather work with you guys than against you,"

Mr. James wrote. "Together we can be unstoppable but in opposition we can cost each other a lot of money."...

 

"Agreed," responded Mr. Roberts.

The e-mails are part of a court filing Wednesday in an antitrust civil lawsuit brought against 11 of the world's largest private equity firms that accuses them of colluding to drive down the prices of more than two dozen takeovers of publicly traded companies.

A judge ordered the private equity defendants to file an unsealed version of the court papers: "These e-mails are strong signals of anticompetitive behavior,"..."It is always highly problematic when you have such freewheeling discussions between competitors."...

As purchase prices reached into the tens of billions of dollars, the firms pooled their money together to make the acquisitions. The private equity industry has said that the consortiums, or club deals, allowed the firms to spread the risk of owning such a large company. In addition, the firms said that by working together they could bring complementary skills in operating the companies once they acquired them.

While the private equity firms characterized the period from 2003 to 2007 as a time of big deal-making and collaboration, the Massachusetts lawsuit contends that something far more sinister was at work... Calling the period "the conspiratorial era," the lawsuit depicts a secret pact between the firms that divided up the big deals among themselves and artificially - and illegally - kept their prices low. There was a "you don't bid on my deal, I won't bid on yours" understanding between the firms, according to the lawsuit.

K.K.R. expressly asked its competitors to "step down on HCA" and not bid on the company, according to an e-mail that was unsealed and written by Daniel Akerson, then a partner at Carlyle and now the chief executive of General Motors. Two colleagues at the private equity firm TPG e-mailed each other about the firm's reasons for deciding to not compete for HCA, according to the lawsuit...

"All we can do is do [u]nto others as we want them to do unto us," Jonathan Coslet, a TPG executive, wrote. "It will pay off in the long run even though it feels bad in the short run."...

Mr. Bush, the University of Houston antitrust law professor, said that such an exchange between the TPG executives should raise eyebrows among government antitrust regulators as classic anticompetitive conduct.

"This sounds like mutual back-scratching," said Mr. Bush. "I'll scratch your back by not bidding on this deal, and you'll scratch mine by not bidding on the next."

 

(h/t Manal Mehta)

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nmewn's picture

A little bid rigging between cronies.

LetThemEatRand's picture

A little bid rigging between two companies.  What does being cronies have to do with their behavior?  And what do you care -- aren't you against regulations such as those that would make this kind of conduct improper?    

Zero Govt's picture

ever bought red peppers or carrots at a farmers market?

done any haggling?

No rules whatsoever

that's how a free market operates, it doesn't need tons of regulations or lawyers or contracts. Just simple buying and selling

 

LetThemEatRand's picture

Works great in a farmers' market.  Not so great among venture capital firms apparently who have unequal bargaining power.  But then again that is obvious to virtually everyone except blind ideologues.

Harbanger's picture

If you're not doing anything tomorrow night, lets go see Atlas Shrugged part II.

Edit: I promise not to touch your titties.

nmewn's picture

"But then again that is obvious to virtually everyone except blind ideologues."

Thats pretty funny coming from someone who uses LetThemEatRand as a handle.

LetThemEatRand's picture

Just admit you are an ideologue.  So much so that you blame cronyism for the price fixing of private individuals (the fact that they work for corporate entities has nothing to do with the behavior) with no governmental role whatsoever.  So much so that you don't even realize that the entire article is about behavior which is only improper or illegal because of government regulations that you want to do away with.   But carry on with your "I'm rubber you're glue" bullshit if it makes you feel better.

nmewn's picture

I never said I didn't have an ideaology, I freely admit it and it can be seen in everything I say or have ever said. You, on the other hand, cannot bring yourself to the realization that your trust in government AS THE benevolent benefactor and arbiter to all society is misplaced.

That is a failed ideologue isn't it?

It can spend a quadrillion on unworkable "solutions" to "percieved" issues which benefit only elites financially and you will say that is the price of civilization and paving over grass.

You are a moron.

You will sit by and say nothing about open bid rigging on the bridges & roads built by government contractors because they "serve a public purpose". You will stand there like an idiot and let college kids go into insurmountable debt and say its an "ïnvestment" for their future. Let someone say XYZ Corp is a known O'Barry bundler and you howl they are an anarchist bent on eating little fluffy puppy dogs and poor children.

Maybe you don't remember the first time we interacted but I do. I took you down through the ten planks of the communist manifesto and you agreed with every one of them...I just didn't tell you till the end...it was those ten planks...lol.

Anyone can do it to you to this day still...unless you start lying, which will be easy to spot ;-)

Sock Puppet's picture

Strawman, you guys wouldn't know ideology if hit between the fucking eyes like a 2 by 4.  You couldn't debate yourself out of a wet paper sack.

nmewn's picture

Your little sock puppet lap dog aside LTER...lets do it...

Abolition of all rights of inheritance.

Agree or disagree?

nufio's picture

i think it should be a 70 year lease on property.. like in china... no eternal property inheritance. 

also 70 year validity to patents.

 

Cliff Claven Cheers's picture

 

Thu, 10/11/2012 - 20:34 | 2879262 Sock Puppet

Dude, looks like you let a bunch a pansy candy asses into fight club by accident. No balls around here just a bunch of dipshits waiting for the sky to fall.

I guess I offended the Tylers with this last comment. I thought this was fight culb, not pussies club.

Cliff Claven Cheers's picture

The Tylers are wiping all my Sock Puppet comments as we speak.  So much for freedom of speech around here.

Cliff Claven Cheers's picture

nmewn, Sock Puppet Here disguised as Cliff Claven.  Looks like the Tylers banned my sock puppet avatar.  I guess this place is run by pansies now.  Not like the old fight club.  Must be under new corporate ownership.

Anyway I will proceed to insult everyone with ol cliff.

Cliff Claven Cheers's picture

Looks like the Tylers don'g like ol Cliff either.  They keep bumping me off.

Oleander's picture

Have had other farmers suggest we raise our prices on products because they are selling said produce at a higher price.

Ha Ha- We of course did not. We let the customers decide where to shop. So glad we avoided collusion. We do not make any deals w/ hagglers either by the way.

Miss Expectations's picture

EVERY vendor at my farmer's market sells their tomatos for $3.00/pound.  $3.00/POUND!!  Stopped going.

nmewn's picture

"A little bid rigging between two companies."

I thought companies weren't people dumbass.

"What does being cronies have to do with their behavior?"

About the same as Solyndra crony executives trying to bilk a few million more through the tax code spud...read it and fucking weep...

http://www.businessweek.com/news/2012-10-10/solyndra-bankruptcy-plan-has-objections-from-irs-energy

"And what do you care -- aren't you against regulations such as those that would make this kind of conduct improper?"

I'm pretty sure you're a green weenie who was all about indebting our children with shit like Solyndra. Its "the law"...its "regulated".

Tell me again how law and regulation cannot be used by statists such as yourself to pick losers AND even still MORE losers.

Fiskers next bitch and we'll go right down the line back to the CRA.

LetThemEatRand's picture

Nice non-answer.  Whenever you start the name calling, I know I got to you.  Do yourself a favor and don't play poker.  You'll lose your ass.

nmewn's picture

Move up and answer the question...I'm gonna out your ass right now.

//////////////////////

I notice you didn't move up to the heavyweight division and answer the question posed LTER. From here on out I will pose the same ten questions LTER. Be ready...you've been advised.

I'm tired of fucking with you...have the answers.

Cognitive Dissonance's picture

Is this that "found swimming bare assed naked when the tide goes out" stuff old Warren was talking about? Or is this just "bidness" as usual in the Wall Street Mafia?

Sock Puppet's picture

Brother Cog, Cdad here, I mean Sock Puppet. Been awhile since we had a litte fun banter back and forth here in fight club.  Glad you could make it.

Cognitive Dissonance's picture

Brother Cdad Sock Puppet,

Please flash the secret hand signal we agreed upon at the last Zero Hedge veteran's conference in Las Vegas so I'll know you are "you".

And pull up your damn short pants while swimming around here. Your plumber's crack is showing for God's sake. 

Brother Cog.

:)

Sock Puppet's picture

I have been reading this site since its inception.  I am on my fourth avatar now.  You know, a little too much to drink or I forget the meds and I say all sorts of stupid shit.  Nice thing about the interwebs is there is always reincarnation going on.

TideFighter's picture

RICO, you gots some 'splainin to do!

sunaJ's picture

Ha,ha. Criminal prosecution for financial corruption? That is so last century.

Cognitive Dissonance's picture

Too funny.

The last century? Or the last last century? Because there weren't too many successful corruption cases brought in the 1900's except for the patently obvious stuff. If you read about it in the papers it had gotten so bad a blind man could see it. Then a few cases were brought to court allowing the rest of the cockroaches to scurry for cover.

riphowardkatz's picture

PERS must get its 8%. No one will care.

Careless Whisper's picture

These guys remind me of da boys runnin' tha local garbage company.

 

Tom in AZ's picture

That was Grandpa, then he sent the kids to college.

 

Cognitive Dissonance's picture

I grew up in a small town heavily populated with "da boys". There was always some anger and even jealousy of the racket corporations and government had going. That official collusion (corruption really) was often used to justify da boys own actions. I suspect that worked in reverse as well.

ceilidh_trail's picture

Yup. Still goes on today in Independence, Ky. Btrds use their own agencies to punish anyone who goes against 'em.

ThisIsBob's picture
http://img.fark.net/images/topics/topic_sprite.png); margin: -7px 0px 0px; width: 54px; display: block; background-position: 0px -26px; float: left; height: 11px; font-size: 14px; vertical-align: baseline; overflow: hidden; border: 0px; padding: 0px;"> 

"Never write when you can talk. Never talk when you can nod. And never put anything in an email."

 

(Elliot Spitzer)

TideFighter's picture

Tyler, you missed the point on this one. Bain is the target, even though the AT actions occurred AFTER he left Bain, this will be a breaking story. 

"The evidence in the case comes as the private equity firms and their business practices remain a focus of the presidential race. The Republican presidential nominee Mitt Romney founded Bain Capital, which is a defendant in the lawsuit. Mr. Romney has made his Bain tenure a cornerstone of his campaign to demonstrate his leadership and private sector experience. At the same time, President Obama has used Bain to attack Mr. Romney, accusing the firm of firing employees at its acquired companies and sending jobs overseas."

amadeusb4's picture

It doesn't matter when Mittens left Bain unless he divested from Bain at the same time.

Obama's campaign has left a lot of meat on the Bain bone untouched. They could go after the Bain connection with Salvadoran death squads or Bain practices with former Soviet asset privatization or even Sensata. It's a wonder that the R's picked such a grotesque candidate with so many liabilities but then you look at the field they had to work with: Gov. Can't remember the third Fed dept he would cut, CEO Uzbekibekibekistan, Gov. vaccines make you instantly retarded, Former Speaker of the House on the moon and Santorum. Was there ever even a question of Obama's reelection in the face of a party that's self immolating before our eyes? Really?

TideFighter's picture

Really? Then there's that whole Frank Davis story. I won't expound because, in my opinion, ZH is better suited for info that bashing candi-dates. 

iDealMeat's picture

I doubt they will pick any Bain bones..   Goldman Sachs owns both of them..  They set the narrative.

amadeusb4's picture

Oh, sorry, it has been pointed out that it is actually Congresswoman vaccines make you instantly retarded. My bad. I'm not from that part of the country, but have flown through MSP and interacted with people there who have apparently gone their entire lives without any kind of vaccinations.

Sock Puppet's picture

Sorry I can't keep with all the stories at the same time.  I am running 3 other Avatars here on ZH.

TideFighter's picture

I know 2, the 3rd was a shock. 

Sock Puppet's picture

I have a couple of for sale, well seasoned histories with user profiles that match all the comments.  These are very persuasive characters.

TideFighter's picture

Reverse Avatar Merger? RAM? Are you asking people to get RAM'd? hehe

Sock Puppet's picture

I have so many conversations going on I can't even remember who or what I am spinning.  Anyway I am off shift in an hour, Bob will take over.

spanish inquisition's picture

Not so fast. I have been thinking of adding another handle for a while but don't want to start from scratch. Anything thats been registered for say 2 years with a whimsical devil may care attitude?  I need to have online battles with myself to up my profile and battling with anyone under 2 years isn't gonna give me the juice I need. I would need to see the posts to see how my "conversations" would play out and forward my agenda. Anything from Paypal to WOW gold. Have Bob get ahold of me if you are out... (/sarc hehe. that was fun)

Sock Puppet's picture

I can let go of my Trav7777 avatar, that one got away from me.  He turned out to quite the douche nozzle, couldn't keep his stories straight.  Or I mean I couldn't keep my lies straight.

BTW I want paid in Euros, I don't trust that american money.

spanish inquisition's picture

Can't handle Trav. The well is poisoned. hehe  Edit: I can  do Euros, just need to convert wow gold or bitcoins

Sock Puppet's picture

Also you can have Gunslinger. I don't know if you remember him.  He went off the fucking reservation (hope that doesn't offend any Native Americans) then that Ginslinger started impersonating him.  I just got tired of using him but he is a useful idot.

spanish inquisition's picture

Did ginslinger send a ransom note? Honestly, where is the love for hard working folk who set up avatars and play them for over a YEAR hoping for a payday just to have someone avatar block them.

Anusocracy's picture

"but he is a useful idot."

The story of your life?