Question

A private equity firm has a partial ownership stake in an energy company. It proposes to acquire another partial stake in a rival energy company. If the private equity firm has voting rights on their boards of directors, what is likely to be the major concern?

a. There are no competitive concerns raised by the acquisition

b. The transfer of competitively sensitive information on the energy rivals could facilitate an anticompetitive agreement

c. The private equity firm could influence strategic decision-making and reduce competition between the two energy rivals

d. The joint venture agreement would be treated just like a merger

Answer 1

c. The private firm could influence strategic decision making and reduce the competition between the two energy levels.

• Because the above question stated the fact that private company just acquired partial stake but not majority stake, if it acuired the majority stake and voting power then it controls the decision as it wants to be.
• Having acquired partial stake and voting power it can significantly influence the decisions of board and with the interest it can reduce the competition.
• It can treated as normal joint venture agreement if it would not have done between the rival firms, as those were rival firms they can be benefitted out of their acquisition synergies