SOME of the biggest private equity firms in the world are being sued by a group of angry shareholders amid claims that the firms conspired to fix the price of deals.

The shareholders, once investors in companies bought by private equity firms, allege in the lawsuit that the firms formed “clubs” to bid collectively in buyout actions. It is claimed that they exchanged information and submitted bids at agreed-upon prices.

The lawsuit, which is seeking class action status, was filed yesterday in the US District Court in Manhattan against 13 private equity firms, including such industry giants as the Carlyle Group, Texas Pacific Group, the Blackstone Group and Kohlberg Kravis Roberts (KKR).

It claims that shareholders “were paid less for their equity shares that they sold to the private equity defendants and their co-conspirators than they would have been paid under conditions of free and open competition”.

The lawsuit comes as the US Department of Justice investigates “potential collusion by large buyout firms”. Blackstone’s president, Tony James, told the Reuters Investment Banking Summit on Tuesday that he had never seen collusion between private equity firms.

Figures from Dealogic, a financial data provider, show that 901 private equity deals worth $289 billion (£152 billion) have been announced in the United States this year. That is nearly twice the value 12 months ago.

The firms, which pool private and institutional capital, are targeting larger and more recognisable companies. The plaintiffs include individuals who own shares in HCA, the hospitals operator, and Harrah’s Entertainment, the casino operator.

HCA agreed to be acquired by an investor group that includes Bain Capital, KKR and Merrill Lynch for about $21 billion in a deal expected to close by the end of the year. Bain and Merrill are also named as defendants in the lawsuit.

Harrah’s is reviewing a buyout offer worth more than $15 billion from Texas Pacific Group and Apollo Management, another to be named in the complaint. Others include Clayton, Dubilier & Rice, Thomas H. Lee Partners and Warburg Pincus.

At the Reuters conference Mr James admitted that the surge in private equity activity had put the industry in the spotlight. “I’m worried about the fact that private equity has grown so quickly and so fast that it’s made itself a natural target for speculation and resentment,” he said. “It has made a lot of money.”

To address these concerns, buyout firms have been organising an industry association, he said. It would not be a“lobbying organisation per se” but would develop academic studies showing the economic benefits of private equity activity.

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