Federal Antitrust Suit Against Ten Prominent Private Equity Firms Based on Allegations of “Club Etiquette” Not to Jump Announced Deals Survives Summary Judgment Motion

From 2003 through 2007, numerous private equity (PE) firms completed leveraged buyouts (LBOs) of 27 mega-cap publicly traded companies, including Hospital Corporation of America.  In 2007, former shareholders of those target companies commenced a private antitrust suit against ten PE firms that were involved in those deals.  They alleged that the PE firms had conspired to rig bids and engaged in other anticompetitive behavior in the LBO market, such as refraining from bidding on (“jumping”) each other's deals, that resulted in successful PE bidders paying less for target companies than they would have in a truly competitive sale process.  The defendant PE firms moved for summary judgment, claiming that the plaintiffs’ evidence was insufficient to sustain their antitrust claims.  The U.S. District Court for the District of Massachusetts recently ruled on their motions.  This article summarizes the plaintiffs’ claims and the Court’s analysis.

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