Private equity firms tighten grip on corporate America

Two out of every five major US mergers and acquisitions in 2022 involved private equity investors, a percentage that has steadily grown over the past two decades.

At least 40% of deals reported to the federal government for antitrust review that year involved a fund or limited partnership, according to the Federal Trade Commission and the Justice Department. That’s a marked increase from 2001, when private investors were only involved in about 10% of deals, the agencies said.

The explosion of M&A involving private investors helps explain the antitrust agencies’ recent focus on private equity, which has drawn criticism that the federal government is unfairly targeting the industry. In March, the FTC opened an inquiry into acquisitions by private equity companies in the US health-care industry.  

Meanwhile, the Justice Department opened a sweeping probe in 2022 into people and entities that have overlapping board seats in competing companies. That enforcement push relied on a rarely invoked antitrust prohibition against so-called interlocking directorates. The initiative has led to resignations at more than a dozen companies including individuals associated with private equity firm Thoma Bravo LLC, and includes scrutiny of major investors including Blackstone Inc., Apollo Global Management Inc. and KKR & Co.

The agencies disclosed the number of deals involving private investors to help justify their decision to require merging firms to disclose additional details about their investors as part of the initial screen for antitrust concerns.

Changes in the investment landscape “have created meaningful gaps in the reporting requirements for a growing number and type of minority holders that have the ability to influence competitive decision-making and to harm competition via acquisitions,” the agencies said in a final rule released October 10. “When these relationships are not well known or easy to identify, the risk that anticompetitive harm from an unlawful acquisition will go undetected is greatly increased.”

Drew Maloney, president and chief executive of the American Investment Council, a trade association for the private equity industry, said the group is reviewing the new rule to ensure it does “not stifle innovation, discourage investment, and push an ideological agenda that undermines economic growth.”

Under US law, all mergers and acquisitions that meet certain thresholds must notify the FTC and DOJ and wait 30 days before closing. The vast majority of mergers raise no concerns and are finalized after the initial waiting period expires. But the agencies can ask for additional information, triggering an in-depth probe of the deal.

The thresholds are adjusted annually for inflation. In 2001, deals valued at $50 million or more required reporting. Today that threshold is set at $119.5 million.

The agencies release statistics annually about the number and size of deals reported for antitrust review, but had never before released information about the nature of companies involved in the transactions.