January 31, 2008
Another Private Equity Buyout Implodes
Alliance Data Systems is suing The Blackstone Group, seeking to force the latter, a private equity firm, to go through with a $6.4 billion buyout deal. According to this story in the Dallas Morning News, The Blackstone Group has announced that it will not proceed with the deal because of "conditions imposed by a federal banking regulator," but others suggest that Blackstone is backing out because of a more generalized buyer's remorse.
According to The New York Times, the suit alleges that Blackstone failed to exercise its "reasonable best efforts" to obtain regulatory approval as required in the buyout agreement. Blackstone now appears not to be interested even in a much smaller investment in Alliance. It is early, but this might be a case to watch, as suits such as these, in which very-well financed parties have billions of dollars at stake, can go to trial and lead to enlightening opinions on the enforceability of best efforts clauses.
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