Speaking as the wrap-up expert at last week’s Buyout Symposium East in New York City, Kevin Conway, Managing Partner of Clayton Dubilier & Rice (Jack Welch’s firm with offices in New York and London) said “the private equity industry is in the inefficient period where limited regulation is being translated into case law.” Andrew Ross Sorkin, financial reporter from the New York Times, agreed that “corporate boards and lawyers don’t always know what’s in the best interest of shareholders” because of the new balance of power favoring financial over strategic buyers.
With so much riding on the outcome—and with uncertainty and vested interests on all sides—it’s no wonder the BV pros who do purchase price allocations often face tense auditors from the Big Four. If that isn’t enough, Sorkin repeated what he’s written in the Times—that the system is creating a version of insider trading he calls “collusion.” But, “I don’t mean that in the legal sense,” he added, “rather in the ‘process’ sense.” Say what?
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