Private equity firms have been called "locusts" by the German chancellor Angela Merkel but proponents argue that private equity investors make companies more efficient, create economic growth and provide good economic returns to investors.
Private equity leads to higher default rates and more bankruptcies and worse outcomes for customers and workersShow moreShow less
Private equity is a misnomer and should properly be called leveraged buyouts. Leveraged buyouts, by definition, increase borrowing and raise the probability of bankruptcy.
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Private equity is behind most recent big retail bankruptcies
Most big bankruptcies recently are due to private equity.
Private equity groups have been behind most of the recent bankruptcies in local newspapers, retail, and grocery stores. In fact, analysis by FTI Consulting found that two thirds of the retailers that filed for Chapter 11 in 2016 and 2017 were leveraged buyouts. The pirate equity groups load debt onto the companies and dividend out the cash to themselves, which often leads to bankruptcy and a trail of job losses and underfunded pensions. Heads they win, tails the company, employees, and suppliers lose.