First and foremost, prices being paid for companies by PE firms are at a record high. Recent data shows that the average purchase price for a PE target is 8.3 times annual EBITDA. When one deducts company capital expenditures, the average price is likely around 10 times annual cash flow. These are VERY high prices which suggest that if there is collusion, they are doing a very poor job of it. Most industry observers would tell you they are much more worried about "irrational exuberance" and the prospect of large PE capital losses than about insider collusion.

Second, in these auctions, the suggestion that other firms "stand down" to let one of their "friends" win in one deal so they can "win" in a later deal is just ludicrous. This is an industry that values deal leadership very highly on a number of fronts. First, the deal leaders take credit for this leadership and this role assists in raising subsequent funds from the large institutional investors. Deal leadership builds franchise value. Second, the deal leader gets to take the largest part of the fees on these deals, so there is a direct economic benefit to deal leadership. And by the way, these fees are hefty so we are speaking about a huge economic motivator.

Third, these club deals are nothing new and have been going on for many years. As such, the extremely sophisticated investment bankers who represent the sellers in these auctions have detailed knowledge of the buying firms and who works together in groups and who does not. They separate out groups and control these processes very carefully in order to extract maximum value for their clients. And as you can tell from point number one, they have been succeeding on behalf of their clients and obtaining record prices. To suggest that these i-bankers are naïve and unable to create tension among buying groups demonstrates a poor knowledge of the state of the industry.

Last, one must understand that PE professionals are a wildly competitive group of highly compensated, wickedly smart individuals, who are much more likely to eat a competitor's liver with some fava beans than to stand down and find ways to avoid competition. They have many friendships within the industry but the first thing on their mind is to generate high IRRs for their investors and thus big bucks for themselves, and playing nice with other firms is way down the priority list.

This does not mean that there may not be problems with information flow. I suspect that this is where the rub may lie. Each firm, when entering an auction process, must sign a "Confidentiality Agreement" with the selling company which prohibits that firm from sharing any non-public information gleaned through the process. Things move quickly at these firms, and it is possible that some of this information could be shared with a firm in the bidding group, or worse, with a new member of a bidding group, who is not yet supposed to be privy to confidential information. This information sharing would be highly unlikely to reduce the pricing of corporate assets, but , if identified, could create challenges for some PE firms. We will have to wait and see.

As for why the Hertz deal yielded a billion dollar gain about 20 minutes after the PF firms got the asset out from under Ford? Well, that one will have to wait for another column.

Rick Rickertsen is a managing partner at Pine Creek Partners, a Washington, D.C.-based private equity firm, and author of Sell Your Business Your Way.