Buyout Firms May Face Anticompetitive Investigation

The Justice Department has sent letters to some prominent private equity firms in what appears to be an inquiry into potentially anticompetitive activity, people who received the letters told DealBook. The requests for information suggest that the delicate dance among buyout firms, who compete in some deals and work side-by-side on others, is drawing some unwanted attention.

The question of whether there is collusion in the private equity world has long been a controversial matter, as DealBook wrote in an October 2005 column in The New York Times. In private, some buyout executives concede that firms’ cooperation, often in the form of “club deals,” can have the effect of lowering prices for the companies they are acquiring.

Whether this amounts to anticompetitive behavior, however, is another matter. Recent auctions have shown that rival buyout teams can fight hard for a takeover target. Consider the recent example of Freescale Semiconductor, in which a competing consortium swooped in with a last-minute offer, albeit an unsuccessful one.