Buzz Archive:
PE Buzz: Private Equity Acquisitions and Hart-Scott-Rodino

by Joseph W. Bartlett, Founder of VC Experts.com, 6/14/2007

Professionals in the private equity market know that we have not seen the last installment in creeping regulation of private equity/hedge funds. Of interest is the FTC's conditional approval of the Carlyle Group's and Riverstone Holdings' acquisition of Kinder Morgan ("KMI"). The problem was that the syndicate would, on closing, control 22.6% of KMI and, through another fund, 50% of Magellan Midstream ... a competitor of KMI. A recent Kelley Drye periodical sums up the issue succinctly:

"The FTC believed the terms of the proposed transaction would make it easier for the acquirers to exercise unilateral market power and increase the likelihood of coordinated interaction between the competitors in specific markets. ... Instead of forcing the divestiture of overlapping assets by the private equity funds, which is a common FTC practice, the terms of the consent order require KMI and Magellan to operate independently and in competition with one another. Carlyle and Riverstone will be prohibited from serving on any Magellan boards, and from exerting any control or influence over Magellan, as long as they hold any interest in KMI. In addition, Carlyle and Riverstone are required to establish procedures to prevent the exchange of competitively sensitive non-public information between KMI and Magellan. The consent order will terminate in ten years."