Antitrust, takeovers and private equity

The Justice Department is opening a can of worms: when do bidding practices in the market for corporate control violate the antitrust laws? According to the WSJ, Justice is looking at private equity firms that sometimes

are cooperating in "club" deals in which they combine their capital and know-how to pursue a given target. A set of polite rules has largely applied to this dynamic. For instance, once a private-equity firm signs a definitive merger agreement with a target, competing buyout groups have shied from "jumping" the transaction with a competing bid. The formation of the "clubs" -- which have drawn as many as seven members into one bidding team -- may at least theoretically depress prices because they limit the number of competing players in an auction.* * *If competing bidders were sharing information about their bids, for instance, or agreeing that the losers would later be invited to join in the winning group, that might represent suspect behavior, as it would artificially suppress prices that companies would fetch at auction.

I'm no antitrust expert, but this is a topic I've always wondered about. In particular, I've been interested in the relationship between the antitrust laws and the Williams Act.

Anyway, here's a brief list of some writing on this subject. Looks like it may be time to update the literature.

• Edward B. Rock, Corporate Law Through an Antitrust Lens, 92 Colum. L. Rev. 497 (1992)
• Edward B. Rock, Antitrust and the Market for Corporate Control, 77 Cal. L. Rev. 1365 (1989)
• Herbert Hovenkamp, Antitrust Violations in Securities Markets, 28 J. Corp. L. 607 (2003)
• Joshua Fried, R. Preston McAfee, et al, Collusive Bidding in the Market for Corporate Control, 48 Nebraska Law Review (2000).

Comments

[Robert Schwartz]

The government sued the brokers about investment syndicates and the anti-trust laws back during WWII. There is an opinion in F Supp. I think the style of the case was US v Morgan Stanley.