bloggingbuyouts

In private equity circles, a club deal is a situation where two or more buyout shops pool their resources to acquire a company. But these deals do not come without controversy.

Vector Capital and Francisco Partners were sued after they agreed to do a buyout together -- after the two had been bidding against each other for the target company. The lawsuit alleged antitrust violations but a federal court in Seattle tossed out the suit, saying that two firms bidding together did not constitute unfair competition because the field of companies that buy other companies is so broad.

In the decision, Judge Richard Jones wrote that their offer was accepted not because of collusion but because of "lack of market interest in WatchGuard," the company that was acquired.

According (subscription required) to The Wall Street Journal, "the decision will likely be cheered by the buyout industry, which has been under antitrust scrutiny regarding joint bids and club deals. In 2006, the Department of Justice opened an inquiry into possible anti-competitive behavior related to club deals that were all the rage at the peak of the buyout boom."

Regulatory openness to club deals could give a boost to the weakened buyout market.