New cartel rules are encouraging more companies to pursue ‘bid rigging’ and misleading conduct claims for M&A deals.
With three recent cases in the Federal Court, more companies are considering anti-trust legal action in the context of M&A transactions, according to Corrs Chambers Westgarth partner, Jonathan Farrer.
Mr Farrer noted recent cases involved claims of bid rigging and misleading and deceptive conduct during M&A negotiations.
“With only the Bradken case decided so far, this was the first test of new cartel and bid rigging rules and the judge applied a very broad interpretation of these rules. This will now have implications for other M&A deals,” Mr Farrer said.
He said the Bradken decision and another recent case in the United States against ten high profile private equity firms were examples of how casual communications and emails could later be used as evidence against bidders.
“Joint bidders need to be very careful about how they develop and document their relationship to ensure they don’t breach anti-trust rules,” Mr Farrer said.
“There is a clear trend of more litigation in this area.
“In addition to Bradken, there are two other billion dollar M&A deals in the Federal Court with allegations of misleading and deceptive conduct. The Bradken decision will only encourage more claims to be brought before the courts.”
Mr Farrer said the issue was relevant to any Australian company dealing with competitors in an M&A bid process, even if they were buying an overseas business.
“There are also lessons for vendors. In particular, sellers need to take steps to ensure have adequate visibility about bidders. A simple example is ensuring that confidentiality deeds require third party consultants or advisers to be named and disclosed.”
In March 2013, Bradken, an Australian mining consumables company, was found to be in breach of the new CCA cartel provisions following its purchase of NWS, a Canadian mining consumables company. Bradken did not bid for NWS. NWS was purchased first by US private equity investment firm Castle Harlan for US$190 million and was on-sold to Bradken for US$212.4 million. Justice Michelle Gordon held that Bradken had engaged in bid rigging and also misleading and deceptive conduct.
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