Goldman Sachs & Bain Capital In Settlement Worth $121M - Analyst Blog

On Wednesday, The Goldman Sachs Group, Inc. GS and Bain Capital Partners announced a settlement of a lawsuit, which accused the defendants of pulling down the prices of leveraged buyouts (LBOs) through collusion before the financial crisis. Goldman will pay $67 million, while Bain Capital will pay $54 million.

The lawsuit, which was filed by former shareholders of the acquired companies in Dec 2007, alleged private-equity firms of bid rigging to reduce competition for takeovers between 2003 and 2007 and deprived investors of billions of dollars. Notably, the case, which was filed in the U.S. District Court, District of Massachusetts comprised eight LBOs worth more than $100 billion. However, the settlement awaits U.S. District Judge William Young's approval.

Apart from Goldman and Bain Capital, other major U.S. private equity firms as defendants in the case include The Blackstone Group L.P. BX, The Carlyle Group LP CG, Kohlberg Kravis Roberts & Co. KKR, Silver Lake Technology Management L.L.C. and TPG Capital Management. These firms will face a trial on Nov 3.

Though Goldman and Bain Capital have agreed to settle they have not admitted to any wrongdoings. They claim such settlements would benefit investors in the form of lower litigation costs, which have been on upswing. However, the lawyer on the plaintiffs' side takes the settlement as a positive for the case proceedings and looks forward to the trial to be held in November with other defendants.

Our Viewpoint
 
Trouble has been brewing for the banks for quite some time now, with the major banks facing a slew of lawsuits since the financial meltdown. Such lawsuits, alleging banks of wrongdoings, tarnish their reputation and financials over time. With the settlement of the lawsuits, banks plan to move forward with their business strategies, after attempting to end issues related to the financial crisis.

Therefore, it is in the interest of the company to resolve such matters at the earliest. However, investors and other financial institutions bearing the brunt of the faulty practices are expected to be fairly compensated.

Goldman currently carries a Zacks Rank #3 (Hold).