Goldman Sachs and Bain Capital Settle Antitrust Violation Suit

(June 16, 2014) — Goldman Sachs and Bain Capital Partners agreed to pay a total of $121 million settling a lawsuit alleging that they and other major private equity firms conspired to limit competition in leveraged buyout deals before the financial crisis.

The settlement, if approved by the US District Court in Boston, would end—for Goldman and Bain Capital—the seven-year litigation filed by former shareholders of the companies acquired in the buyout deals from 2003 to 2007.

Goldman will pay $67 million while Bain Capital will pay $54 million, according to papers filed on June 11. Despite these settlements, both firms have denied any wrongdoing in the antitrust case.

“The court never cited any evidence—no document, no witness, no meeting—tying our firm to any of the alleged claims,” a Bain Capital spokesperson said in a statement. “We continue to believe the case is meritless and baseless, but ultimately determined that it was best for our investors and our firm to put this matter behind us in light of the costs and distraction of six years of litigation.”

“We’re pleased to put the matter behind us.” a Goldman spokesperson said.

Five firms—Blackstone, Carlyle, KKR, Silver Lake Partners, and TPG—remain in the lawsuit after Goldman and Bain Capital’s settlements, as well as two dismissals last year.

“We went toe-to-toe with the defendants over the past seven years and Bain and Goldman Sachs are the first defendants to agree to settlement terms,” said K. Craig Wildfang, the plaintiffs’ lawyer. “We look forward to a trial against the remaining defendants currently scheduled for November.”

According to original civil suit filed in 2007, the accused firms violated federal antitrust laws by agreeing not to “jump” each other’s deals in a total of nine leveraged buyout transactions. Under an “overarching conspiracy,” private equity firms promised to “pay less than fair value for the target companies, which in turn deprived [their] shareholders of the true value of their shares upon sale of the target companies,” the plaintiffs said.

The lawsuit filed by shareholders, a trust, and a public retirement trust fund included leveraged buyouts that totaled more than $2.5 billion.

“The transactions at issue here were ‘club deals,’ whereby two or more private equity firms join together to conduct a leveraged buyout,” the lawsuit said. “The shareholders do not contest the legality of club deals, but instead contest what they characterize as illegal agreements between the private equity firms to allocate the leveraged buyout market on a wide scale.”

Specifically, the plaintiffs alleged that the firms submitted sham bids, agreed not to submit bids, granted management of the target companies certain incentives, and included losing bidders in the final transactions, the suit said.

The case will go to trial beginning November 3 against the remaining defendants.

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