WASHINGTON (AP) – Two private equity firms on Friday backed out of their $8 billion buyout of upscale audio equipment maker Harman International Industries Inc., marking the latest such deal to run into trouble amid tightening global credit conditions.

Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc.’s private equity unit told Harman they are under no obligation to complete the merger because “a material adverse change in Harman’s business has occurred,” Harman said in a statement.

Harman, whose audio equipment brands include Infinity, JBL and Harman Kardon, said it disagreed with those assertions, but did not make clear what action, if any, it would take.

Investors punished the stock all day long as word dripped out that KKR and GS Capital Partners were attempting to nullify the deal. By the end of the day, Harman shares had plummeted by more than 20 percent.

A person familiar with the negotiations who asked not to be named because he was not authorized to speak publicly told The Associated Press that the private equity firms sought to squash the deal over questions about Harman’s financial health, not because of any financing difficulties in a tight credit market. The person said the effort to back out is sincere, and not a negotiating tactic.

Representatives for KKR and GS Capital Partners did not immediately return phone calls.

Shares of Harman dropped $23.49, or 20.93 percent, to $88.76. In the past year, the company’s stock has traded between $79.98 and $125.13, which it hit after the deal was announced in April. KKR and GS Capital Partners agreed to pay $120 per share in cash for Harman and the company’s board approved the deal, which was scheduled to close at the end of the year.

The once-booming private equity industry has stumbled during the past few months as tightening credit conditions have caused investors to balk at funding the deals. Buyout firms – which snap up companies and then take them private – had grown used to easy credit, and have recently had a difficult time persuading banks to underwrite their takeovers.

KKR on Friday had success in attracting investors to a $5 billion loan used for its acquisition of First Data Corp. Initial reluctance by Wall Street caused the buyout shop to lower the amount of its borrowing, and come out with an initial $5 billion instead of an original plan to raise $14 billion.

Cerberus Capital Management in July had to inject more equity into its takeover of Chrysler Group from Germany’s Daimler. More recently, Home Depot lowered the sale price on its wholesale supply unit by 17 percent to complete its sale to private equity firms.

Problems with the Harman deal comes a day after SLM Corp., commonly known as Sallie Mae, issued a statement saying it expects the investors seeking to buy it for $25 billion to honor their commitments. The Sallie Mae deal includes a $900 million breakup fee compared with a $225 million termination fee in the Harman transaction.

About two hours before Harman announced late Friday afternoon that the buyout was off, NYSE Euronext Inc. issued a release saying the exchange had asked the company if there were any events to explain unusual trading of its stock. Harman said at the time that its policy was not to comment on unusual market activity or rumors.

Shortly before 4 p.m. EDT, however, the company issued a terse press release, explaining what had happened.

The credit crisis caused four of Wall Street’s top investment banks to report this week that it wrote-off some $4 billion of loans during the third quarter. In some cases, the banks weren’t able to find funding for the loans – or they plunged in value as investors retreated.

There has also been a number of reports that major investment and retail banks have approached private-equity firms about calling deals off. The banks have offered to pay the breakup fee to keep the large loans off their books.

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AP Business Writer Joe Bel Bruno in New York contributed to this report.

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