DOJ Antitrust Head Signals Aggressive Enforcement against Private Equity Transactions

US antitrust enforcers have signaled that non-public fairness corporations are the prime targets for upcoming aggressive antitrust merger enforcement. In a latest interview, US Assistant Lawyer Normal Jonathan Kanter acknowledged that the motive of a personal fairness agency could also be “designed to hollow out or roll up an industry and essentially cash out,” which “is often very much at odds with the law, and very much at odds with the competition we’re trying to protect.”[1] His remark comes after Lina Khan, the present Federal Commerce Fee (FTC) Chairwoman, acknowledged that non-public fairness roll-ups can be a focus for the FTC.[2] It’s not solely unsurprising that progressive antitrust enforcers are specializing in personal fairness after the business introduced a document 14,730 offers final yr globally price $1.2 trillion, which was almost double the earlier excessive in 2007.[3] The above feedback present a number of key takeaways for stakeholders going ahead:

  • As a common matter, these statements additional solidify the notion that antitrust merger enforcement goes to proceed to be extraordinarily aggressive and point out that the US Division of Justice (DOJ) and the FTC might intently scrutinize personal fairness transactions even when there isn’t a apparent horizontal or vertical situation. For instance, the DOJ and the FTC have already began investigating much less conventional theories of hurt, such because the impression on labor and the atmosphere.

  • Private fairness corporations ought to anticipate the potential for heightened scrutiny in situations the place a personal fairness agency has engaged in serial acquisitions inside the identical business (often known as roll-up transactions), particularly in healthcare-related fields. Will probably be necessary for stakeholders to not solely consider the present acquisition for aggressive points, however to additionally think about the impression of a long-term “roll-up” plan and its affect on pricing, service, and high quality.

  • Look ahead to companies to deliver extra Clayton Act Part 8 instances, which prohibits interlocking directorates (aka a single agency appointing officers and administrators at a number of rivals).[4] Private fairness corporations usually will appoint personnel to the boards of the agency’s portfolio corporations, which can include horizontal rivals. Going ahead, these appointments would require extra consideration to keep away from working afoul of Part 8.

  • The DOJ and the FTC will even have an enhanced give attention to the impression of personal fairness corporations performing as divestiture patrons when the company orders merging events to divest belongings to protect competitors. Assistant Lawyer Normal Kanter acknowledged, “[I]n many instances, divestitures that were supposed to address a competitive problem have ended up fueling additional competitive problems.”[5]

Whereas the diploma to which companies will extra intently scrutinize personal fairness transactions stays unclear, it’s essential for personal fairness corporations to interact antitrust counsel early within the transaction course of each to guage the transaction at hand, in addition to any future transactions which will, collectively, result in enhanced regulatory scrutiny.

[1] Stefania Palma and James Fontanella-Khan, “Crackdown on buyout deals coming, warns top US antitrust enforcer,” Monetary Occasions (Might 18, 2022), 

[2] “Remarks of Chair Lina M. Khan regarding the Request for Information on Merger Enforcement Docket No. FTC-2022-0003,” Federal Commerce Fee (Jan. 18, 2022), 

[3] Palma supra at 1.

[4] Id. at 3.

[5] Id. at 2.

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