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The US has sued private equity group KKR, alleging it repeatedly flouted requirements to provide antitrust regulators and enforcers with standard pre-merger filings during a wave of deals in 2021 and 2022.
The lawsuit comes after lengthy settlement discussions between KKR and the Department of Justice. The talks reached an impasse because the DoJ sought a large monetary penalty and wanted to install an agency monitor inside the New York-based private equity pioneer, according to securities filings and people familiar with the matter.
The lawsuit is one of the last efforts by the DoJ’s antitrust unit to thwart anti-competitive private equity dealmaking after Jonathan Kanter, its recently departed chief, cracked down on buyout groups rolling up large swaths of the US economy.
KKR is challenging the enforcement action in a countersuit. The group, which manages more than $500bn in assets, said its filings “complied” with regulations and any omissions were “inconsequential and inadvertent”.
KKR characterised the action as an attempt to “weaponise” confusing guidance on the filings on the eve of a leadership transition from President Joe Biden to president-elect Donald Trump.
The DoJ did not immediately respond to a request for comment on KKR’s countersuit.
The justice department alleged KKR altered documents for pre-merger filings in at least eight deals, failed to submit any filing for at least two transactions and “systematically” omitted required documents for at least 10 deals.
The complaint centres on the Hart-Scott-Rodino (HSR) form, which companies fill out to notify the Federal Trade Commission and the DoJ about deals exceeding a certain threshold. Some KKR deals being scrutinised include its near-$5bn purchase of private jet operator Atlantic Aviation in 2021, and a 2021 deal for Emsi, a labour market data group, according to legal filings.
Staff behaviour suggested “a culture of non-compliance . . . that pervades [KKR’s] investment business”, the DoJ alleged. A KKR partner cited in the complaint instructed a subordinate to “revise [a chart] for HSR purposes”, while another employee who had omitted material in a pre-merger filing referred to the company’s approach as: “I’ve always been told less is more,” followed by a smiley face.
Doha Mekki, acting head of the DoJ’s antitrust division, said: “Through document omissions, alterations, and failures to report deals, KKR threatened the integrity of the division’s premerger reviews and, in some cases, obscured the market impact of its deals and serial acquisitions.”
KKR said the enforcement action reflected antitrust officials’ “hostility” towards private equity dealmaking and their attempts “to deter mergers altogether, and especially transactions involving private equity, by increasing the cost to obtain regulatory clearance for such transactions.”
The DoJ and the FTC in 2023 revised merger guidelines for the first time in more than four decades, requiring buyout groups to disclose more information in the early stages of a transaction. However, the sector’s lobbyist recently joined a legal challenge to the new guidelines led by the US Chamber of Commerce.
