PE firms accused of bid-rigging

While nothing is proven about the details of the bid-rigging alleged in a complaint opened by a Boston judge the accusation raises an important point
we continuously make about the way that Mergers and Acquisitions are handled. It is the fact that company managements have too much influence over the terms of deals while the shareholders (in listed companies) do not have enough leverage to exact the best possible terms from the acquirer. There often is left money on the table (call it the 'Acquirer's Surplus') which could and should have been squeezed out in return for any agreement. Naturally, the shareholders (or investors in the Private Equity funds) see it from a different perspective and may balk at paying too high a premium. Therefore they should equally be better protected and allowed to bloc any acquisition proposed to them if the terms are considered to be unfavourable.
These measures would alleviate any problem created by collusion among potential bidders - be the Buy-out firms or commercial bidders.
(11/10/2012)