When the U.S. Department of Justice began its inquiry into club deals earlier this year, a spokesman for the UK Financial Services Authority told me that it was planning “no investigation into private equity deals in the UK.” Now, less than two months later, officials from the FSA are interviewing people involved in four key takeover bids to try and understand how information is passed between banks and law firms. The regulator wrote in a newsletter circulated to market participants yesterday: “We aim to increase our understanding of how information is controlled and consider ways to tighten the flow of information.”
Is the UK’s FSA perusing its own agenda? Or is it reacting to the DoJ’s investigation? To be fair to the FSA, in some deals involving multiple PE groups, the number of firms officially classed as insiders can get into silly proportions. And it is thought that all four deals being investigated involved information leaks which caused those companies to issue announcements before the deals had been agreed. (For a list of companies that have made announcement prior to inking deals in Europe in 2006 see www.evcj.com.)
But something is puzzling me about the FSA’s stance? If it really is interested in cleaning up the City, then why investigate only four firms? Is it a manpower issue? The FSA is not nearly as equipped to carry out this type of investigation as are the DoJ or SEC — so does it just want to be seen to be doing something? Or are those the only takeovers that merit review.
The results of this investigation are not expected until next spring. I appreciate that investigations take time but this investigation/study seems to be more of a box checking exercise than a meaty review.