Private equity firms buy businesses in the hopes of flipping them for a profit a few years later. The idea is simple enough. But companies bought by private equity firms are 10 times as likely to go bankrupt as those that arent. The industrys defenders claim that this is simply because private equity firms often buy teetering companies; no wonder, then, that a disproportionate number fail. Besides, they say, no firm wants its business to go bankrupt.
But what if that werent true? What if private equity firms not only tolerated but profited from the bankruptcy of their companies? (Here, I write in my personal capacity, and my views do not necessarily reflect those of the Department of Justice.)
