French regulator in buyout probe

The AMF is reportedly investigating possible instances where hedge funds have colluded with private equity funds to force listed companies into buyouts, as the industry continues to come under greater political scrutiny across Europe.

The Autorité des Marchés Financiers, the French financial regulator, is reportedly looking into several deals where it suspects hedge funds illegally colluded with private equity firms to facilitate the buyout of listed companies.

Gerard Rameix, general secretary of the AMF, said the regulator is currently investigating “several specific situations where we suspect this activity may have occurred,” according to the Financial Times newspaper.

The AMF is reportedly looking into several deals where it believes activist hedge funds pushed listed companies into accepting a buyout, having already agreed to sell their stake to a buyout firm at a profit – thus giving the firm a significant advantage at auction. 

Since private equity firms are usually not allowed to do hostile deals under the terms of their funds, it would be advantageous to link up with a hedge fund that has no such restriction and can precipitate a buyout.

Rameix described the practice as “a cross between insider trading and market collusion”.
However, the AMF’s investigations are not yet a cause for concern. Rameix said the regulator had found “no evidence” that the practice existed and that it was “very difficult to prove”.

The news comes in the wake of growing political opposition to the buyout industry across Europe. In the UK, the trade unions have led an effective media campaign portraying private equity firms as “amoral asset-strippers” and “casino capitalists”, and pressuring firms to improve their transparency.

In Germany, where a leading politician famously branded the industry as “locusts”, a law was recently passed forcing investors with a shareholding of more than ten percent to disclose their identity, a move seemingly aimed at discouraging activist hedge funds.

The AMF was unavailable for comment.