Antitrust Focus On Private Equity Funds And Serial Acquisitions

Shearman & Sterling LLP


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Until relatively recently, private equity buyers were viewed as largely benign. Where antitrust regulators expressed concerns with private equity buyers, it was generally in the context...
United States Antitrust/Competition Law
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Until relatively recently, private equity buyers were viewed as largely benign. Where antitrust regulators expressed concerns with private equity buyers, it was generally in the context of them being viewed as sub-optimal divestiture buyers. This changed during the Trump administration where the Democratic minority began to voice concerns about the incentives of private equity players.

The rhetoric has increased in intensity during the Biden administration which has brought challenges targeting private equity buyers and their role in serial acquisitions, issued new Merger Guidelines explicitly targeting serial acquisitions, and proposed a revamp of the HSR pre-merger process that asks for additional information on prior deals. Absent from the discussion has been a clear articulation of why private equity ownership in and of itself increases competitive concerns. However, despite a recent set back in the Welsh Carson challenge and the lack of an articulated rationale, the role of private equity in serial acquisitions remains under the regulatory microscope.


Until relatively recently, private equity buyers were viewed as largely benign. Unlike strategic buyers, they often made acquisitions that did not increase concentration, and if they followed up with a subsequent acquisition in the same industry, this was viewed as no different from any other deal involving competitors. While sometimes they engaged in "roll ups" – a succession of acquisitions to scale up an existing portfolio business – these were not viewed as necessarily suspicious. Moreover, problematic roll-ups or serial acquisitions were not inherently an activity of private equity.1If some smaller deals were not individually subject to Hart-Scott-Rodino ("HSR") pre-merger reporting requirements, this was simply a result of the size thresholds of the HSR regime which were explicitly adopted in recognition that smaller deals were less likely to be problematic. In circumstances where a non-reportable deal was problematic, the regulators still had the ability to investigate and challenge, a power that they did exercise from time to time, mostly directed at strategic rather than private equity buyers.2

Where the antitrust regulators did express concerns with private equity buyers, it was generally in the context of them being viewed as sub-optimal divestiture buyers. There was a concern that they would lack the industry experience to preserve competition, and that their focus on cutting costs and streamlining might run counter to the support that a new competitor might need in a market where it had not previously been active. These concerns were underscored by several situations where the regulators had permitted divestitures involving private equity buyers, only to see the new competitor struggle or fail down the line.3 With that exception, however, private equity remained largely outside the crosshairs of the U.S. regulators.

The rhetoric around private equity buyers began to change a few years ago. In 2018, Rohit Chopra, then one of the minority Democratic Federal Trade Commissioners, spoke at an antitrust symposium pre-conference dinner and expressed concerns about the potential for private equity to reduce competition, saying, "I think we need to renew our attention to better understand how [private equity] funds and how these deals are affecting competition in our economy."4 A few months later, then-Commissioner Chopra raised similar concerns about the long-term motives of a private equity-backed entity acquiring a vertical supplier. In his dissent in the Matter of Sycamore Partners, he said, "While some investment firms have strategies to invest substantial capital to grow and nurture a business, other investment firms might not have a strategy that is aligned with vigorous competition." He then called into question the particular private equity entity's "approach and track record [, which] suggest[s] that the fund will operate assets much differently than a typical buyer, in ways that lead to higher margins, without any guarantee of greater output and service offerings.5

The Biden Administration brought new leaders to both the Federal Trade Commission ("FTC") and the Department of Justice Antitrust Division ("DOJ") who increasingly expressed concerns around private equity acquirors. In January 2022, in a statement announcing the joint FTC-DOJ review of the Merger Guidelines that set forth the enforcement policy of the agencies, FTC Chair Lina Khan explicitly referred to the need to determine whether "the guidelines [are] adequately attentive to.... roll-up plays by private equity firms."6 In May 2022, Assistant Attorney General Jonathan Kantor, antitrust chief at DOJ, gave an interview to the Financial Times warning that the DOJ would be taking a tougher stance on roll-ups: "Sometimes [the motive of a private equity firm is] designed to hollow out or rollup an industry and essentially cash out. That business model is often very much at odds with the law and very much at odds with the competition we're trying to protect."7 The following month, Chair Khan, also in the course of a Financial Times interview, advocated taking a "muscular" approach toward private equity deals. Chair Khan addressed potential competitive concerns arising from roll-ups: "Every individual transaction might not raise problems, but in the aggregate you've got a huge private equity firm controlling, say, veterinary clinics." However, she also referred to broader societal concerns, including "an increase in the mortality rate [in nursing homes] after private equity buys them,"8 raising the specter of harms that might not necessarily be classified as pure antitrust concerns.

FTC sues jab consumer partners

Within days of Chair Khan's Financial Times interview, the FTC brought its first challenges explicitly targeting a private equity buyer, requiring divestiture remedies in two acquisitions of veterinary clinics by JAB Consumer Partners ("JAB"). First, the FTC required JAB and its subsidiaries, Compassion-First Pet Hospitals and National Veterinary Associates ("NVA") to divest veterinary clinics in California and Texas as a condition of their proposed $1.1 billion acquisition of competing clinic operator SAGE Veterinary Partners. The FTC also imposed robust prior approval and prior notice requirements on JAB/NVA's future acquisitions of specialty and emergency veterinary clinics.9The complaint referred to the growing trend of consolidation by large chains, including NVA. The FTC press release quoted Holly Vedova, FTC Director of the Bureau of Competition, as saying, "Private equity firms increasingly engage in roll up strategies that allow them to accrue market power off the Commission's radar," and "The prior notice and approval provisions will ensure the Commission has full visibility into future consolidation and the ability to address it."

Second, just two weeks later, as a condition of NAV's proposed $1.65 billion acquisition of veterinary clinic owner Ethos, the FTC ordered JAB/NAV to divest clinics in Richmond, Va., Denver, San Francisco, and the Washington, D.C. area. The Commission again imposed strong prior approval and prior notice requirements.10Once more, the complaint asserted that the deal was part of a growing trend towards consolidation in the emergency and specialty veterinary services markets across the United States in recent years by large chains, including JAB. The FTC press release again quoted Holly Vedova as saying, "For the second time in a month, the FTC is taking action to prevent private equity firm JAB from gobbling up competitors in regional markets that are already concentrated...Divestitures will help preserve current competition, and the prior notice and approval requirements will allow the FTC to keep a close watch on these markets moving forward."

Notably, in both cases and particularly in the press releases, the FTC largely conflated JAB, the private equity company, and NAV, the operational entity that actually ran the clinics. These deals would have raised the same concerns, irrespective of the ownership of NAV. Yet the rhetoric in the press releases clearly suggested that ownership by private equity increased the competitive concerns in and of itself, without providing any real basis for the assertion.

New HSR process and merger guidelines sharpen PE focus

Meanwhile, the FTC and DOJ continued their review of the Merger Guidelines, while also considering a broad revision of the HSR filing process.The FTC and DOJ issued its HSR proposal in June 2023, revamping significantly the HSR form to include substantial additional material to assist regulatory review. 11 That proposal, which remains pending at the time of writing, includes an increase of the look-back period to report prior acquisitions in the same industry from five to ten years, together with an elimination of the dollar threshold, which is clearly aimed at identifying industry roll-ups. The agencies then issued their draft Merger Guidelines one month later; these were issued in final form in December 2023.12 Both the draft and the final version of the Merger Guidelines included a guideline explicitly addressing roll-ups (Guideline 8 in the final version), stating, "Where one or both of the merging parties has engaged in a pattern or strategy of pursuing consolidation through acquisition, the Agencies will examine the impact of the cumulative determine if that strategy may substantially lessen competition or tend to create a monopoly."13

The stage was thus set for an even more aggressive challenge, this time involving a series of consummated transactions and a private equity owner that at the time of the challenge was holding a minority stake.

FTC sues Welsh Carson and U.S anaesthesia partners

On September 21, 2023, the FTC filed a groundbreaking complaint in federal court against private equity fund Welsh Carson and its portfolio company, U.S. Anesthesia Partners ("USAP"). Unlike the JAB complaint, the challenge was not part of a negotiated settlement but targeted a series of consummated acquisitions and other conduct over a number of years. In its complaint, the FTC accused Welsh Carson and USAP of engaging in a decade-long acquisition strategy and anti-competitive scheme to consolidate anesthesiology services in Texas. The FTC alleged that Welsh Carson and USAP violated a host of antitrust laws, including Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act, and Section 5 of the FTC Act, by engaging in a three-part anti-competitive strategy to consolidate and monopolize the anesthesiology market in Texas.14

The FTC first alleged that over a ten-year period, the defendants acquired 17 anesthesiology practices in cities across Texas including Houston and Dallas. According to the FTC, after each acquisition, the defendants were able to reduce competition in the relevant local market and raise reimbursement rates paid by insurers, and ultimately, patients. In support of these allegations, the FTC cited internal Welsh Carson emails and documents in which the private equity fund discussed the "synergies" to be achieved from its "value maximization plan" and "tuck-in acquisitions." Additionally, the FTC claimed that USAP entered into a series of price-setting agreements in which USAP charged its own, higher prices for services rendered by anesthesia providers who chose to remain independent in markets such as Houston and Dallas. The complaint also accused Welsh Carson and USAP of entering into a market allocation agreement with a competing anesthesia provider in which the parties agreed to stay out of one another's local markets.

The FTC's complaint sought a permanent injunction which would prevent USAP and Welsh Carson from engaging in the alleged anti-competitive activities in the future. In addition, the complaint requested additional equitable relief as deemed appropriate, including but not limited to "structural relief," which could reference a potential unwinding of the prior transactions.

The complaint represents the first time in over five decades that a U.S. antitrust agency has alleged a violation of Section 2 of the Sherman Act, which prohibits monopolies or attempts to monopolize or conspiracies thereof using anti-competitive conduct, through the use of roll-up acquisitions. In an accompanying press release, FTC Chair Lina Khan warned, "[t]he FTC will continue to scrutinize and challenge serial acquisitions, roll-ups, and other stealth consolidation schemes that unlawfully undermine fair competition and harm the American public."15

Notably, the case targeted both the acquirer, USAP, and its private equity sponsor, Welsh Carson, although Welsh Carson's stake in USAP had been well below 50 percent (around 23 percent) since 2017. Nonetheless, according to the FTC "[d]espite the changes in the degree of its formal ownership of USAP, Welsh Carson has actively directed USAP's corporate strategy and decision-making, particularly with respect to mergers and acquisitions of anesthesia practices in Texas."16 Critical to the FTC's argument was the fact that Welsh Carson had at least two seats on the USAP board, took the lead in hiring most of USAP's management, and provided USAP with strategic, operational, and financial support.

On May 13, 2024, the judge ruled on motions to dismiss filed by USAP and Welsh Carson. USAP's motion to dismiss was denied and the case was allowed to proceed. However, the court found that the minority interest was fatal to the allegation that Welsh Carson "was violating" antitrust law and dismissed the case against Welsh Carson.17 While the FTC could appeal the ruling, it is a significant loss for the FTC, albeit limited in application to companies that are not majority-owned by a private equity fund. Assuming this approach is adopted by other courts, it does raise an interesting issue as to whether different private equity funds within one private equity "family" would be aggregated for control purposes. Such funds typically have different investors and are separate persons for HSR purposes but are often under common control as a practical matter through the general partners. A literal approach looking purely to economic interests could further undermine the FTC's efforts.

The Future?

There are a number of open questions regarding future FTC and DOJ enforcement against private equity-backed acquisitions. The granting of Welsh Carson's motion to dismiss has cast a shadow over enforcement, at least as it relates to minority-held portfolio companies. There is also the unresolved question, never really addressed by either agency, of why the involvement of private equity changes the antitrust analysis of a deal. The actions against USAP and NAV can be framed in traditional antitrust terms; it is not clear why or how private equity ownership added to the competitive harms. Would the FTC have viewed the deals as less problematic if the buyer had been owned by a public or family-owned company, and if so, why? Moreover, the broader attacks on private equity for cost-cutting and down-grading service are not in themselves a basis for antitrust challenge. If a decline in service results from a lack of competition post-closing, then this would be a basis for antitrust concern, irrespective of the ownership of the buyer. If it results from something else, then it should not be actionable under the antitrust laws. A deal may result in a change of management with adverse consequences for the market for all sorts of reasons that do not implicate the antitrust laws. There are also open questions around the proper remedy to address a series of small, anti-competitive transactions that closed several years (e.g. in Welsh Carson, a decade) ago where the businesses have been fully integrated. In some cases, it may not be tenable to "unscramble the eggs."

That said, there is no evidence that the FTC or DOJ will retreat from their focus on private equity and serial acquisitions. The rhetoric and the focus on private equity in the FTC press releases strongly suggests that the agency views the involvement of a private equity player as affecting the competitive analysis. In March 2024, the FTC, DOJ, and the Department of Health and Human Service issued a request for public comment seeking information on non-reportable deals in the healthcare industry.18 On May 9, 2024, a senior DOJ official reiterated that the DOJ is looking at smaller, non-reportable acquisitions including those involving private equity to bolster its antitrust cases in court, and specifically referred to the healthcare and agricultural industries as priority sectors.19 On May 23, 2024, the FTC published a blog update announcing that the FTC and DOJ were "seeking input from consumers, workers, businesses, advocacy organizations, professional and trade associations, local, state, and federal elected officials, and academics and other experts" on "serial acquisitions in any sector of the U.S. economy."20 The blog update referred to "growing concerns about the proliferation of serial acquisition strategies, especially among private equity firms, real estate investment trusts, and other corporate actors." Markets where "competition occurs primarily at the local level," such as healthcare and retail, were of particular concern, and defense, cybersecurity, distribution, agriculture, construction, and aftermarket/repair markets" were also specifically mentioned. As for Welsh Carson/USAP, even without a successful appeal, the FTC is still able to proceed against USAP in the first legal challenge by the U.S. agencies in decades alleging that a roll-up strategy violates not only Section 7 of the Clayton Act, but also Section 2 of the Sherman Act.

As signaled in the new Merger Guidelines, serial acquisitions, private equity backed or not, will continue to be a major focus of the agencies; the newly expanded HSR form will provide the agencies with more ammunition to identify and investigate; and based on public pronouncements of the FTC and DOJ, private equity's involvement will continue to attract regulatory attention.


1. See e.g. FTC challenge to a series of acquisitions by TALX, a subsidiary of Equifax,

2. See e.g. FTC challenge to Ottobock's acquisition of Freedom Innovations,
; DOJ's challenge to TransDigm's acquisition of SCHROTH,

3. For example, when Hertz acquired Dollar Thrifty, it divested certain locations to a divestiture buyer backed by Macquarie Capital. After the divestiture buyer declared bankruptcy,
certain of the locations ended up being reacquired by Hertz,

4. Pallavi Guniganti, FTC Commissioner Hits Out at Private Equity, GLOBAL COMPETITION REVIEW (Sept. 25, 2018),

5. Public Statement, Fed. Trade Comm'n, Statement of Commissioner Chopra IN the Matter of Sycamore Partners II, L.P., Staples, Inc. and Essendant Inc. (Jan. 28, 2019),  www.


7.Stefania Palma & James Fontanella-Khan, Crackdown on Buyout Deals Coming, Warns Top US Antitrust Enforcer, THE FINANCIAL TIMES (May 19, 2022),

8.Stefania Palma et al., Lina Khan Vows "Muscular" US Antitrust Approach on Private Equity Deals, THE FINANCIAL TIMES (June 9, 2022),






14. Complaint, FTC v. U.S. Anesthesia Partners, Case No. 4:23-cv-03560 (S.D. Tex. Sept. 21, 2023).

15. Press Release, Fed. Trade Comm'n, FTC Challenges Private Equity Firm's Scheme to Suppress Competition in Anesthesiology Practices Across Texas (Sept. 21, 2023),  www.

16.Complaint at ¶ 35, FTC v. U.S. Anesthesia Partners, Case No. 4:23-cv-03560 (S.D. Tex. Sept. 21, 2023).





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