Are Private Equity Consortia Anticompetitive? The Economics of Club Bidding
30 April 2007
By Dr. Elizabeth Bailey
There has been a growing trend toward private equity firms combining in consortia to submit bids for a target company rather than individual private equity firms making independent bids. A private equity bidding consortium, or club, is comprised of two or more private equity firms that pool their funds in order to submit a joint bid. This increasingly common practice has attracted the attention of the US Department of Justice, which has expressed interest in understanding whether and how consortium bidding softens competition. In this article from The Antitrust Source, NERA Vice President Dr. Elizabeth Bailey provides an economic framework for evaluating whether consortium bidding by private equity firms is pro- or anticompetitive. In addition, Dr. Bailey proposes empirical strategies to disentangle competitively neutral bidding practices from anticompetitive bidding practices when there is no "smoking gun."
This article, from the April 2007 issue of Antitrust Source, has been reproduced with permission from the American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
