I'm pretty sure KKR's Henry Kravis won't get super-cool stereo equipment from Harman International Industries (NYSE:HAR) this Christmas.

Instead, he might get named in a lawsuit as KKR and Goldman Sachs' Capital Partners (NYSE:GS) announced last Friday that they are ditching their $8 billion buyout. As a result, Harman's stock went into a death spiral, losing more than 24% of its value.

It's hard to believe that it was just last April Harman's CEO, Dr. Sidney Harman, was buddy-buddy with KKR and Goldman. He said the transaction was in the "best interest" of shareholders. As for Kravis, he called the company "outstanding."

So much for old press releases. Now, KKR and Goldman are claiming that the deal, essentially, stinks. Or, to use lawyer-speak, the firms are invoking the so-called MAE (material adverse effect) clause. This allows them to walk away from a deal if there is serious deterioration in the seller's operations.  In light of the turmoil in the private equity markets, we are seeing saber-rattling with MAE clauses for deals like SLM (NYSE:SLM) and Reddy Ice (NYSE:FRZ).

Is this an indication that KKR will stop funding other deals? I don't think so. 

If you take a look at KKR's prospectus for its upcoming IPO, the firm talks about its focus for "realizing value over the long term," as well as its abilities for completing deals.

Yet, in the case of Harman, KKR is willing to risk is reputation and even its IPO, which already looks iffy because of the meager performance of the Blackstone Group's (NYSE:BX) offering. And if there is no MAE violation, KKR will have to pay a reverse termination fee of $225 million.

As for Harman, this is the worst-case scenario. Investors can only wonder what KKR thinks is wrong with the company. So for Foolish investors, it's probably best to wait until we get more details before diving into the stock of Harman.

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