that sailed west more than 500 years ago. Somebody put up the money and gave them a charter. They could plunder, make war, steal, bribe, and everything else. Profits to the shareholders. Modern times is just dusting off an old model.

I work with a fair number of p.e. firms. In the vast majority of situations we see, the alternative to p.e. Is bankruptcy.

I suppose one could argue that p.e. is a fate worse than death, but usually, the company got in trouble, often because they didn't know what they were doing, and their creditors forced them to get a p.e. firm involved as a last ditch effort to save what they all believe is a good business with long-term potential.

The p.e. firm injects capital and brings in experts as saving companies in dire straits. Yes, often that involves painful layoffs, but in most cases the company overhired or needed to take less drastic action earlier but didn't. In other words, the p.e. firm gets the bad rap for the owner's mistakes.


On the other hand, there are certainly abuses. There are situations where the company should be liquidated but the p.e. firm comes in and drains it of assets for itself through exorbitant fees and leaves next to nothing for the original creditors. They didn't really add value, they just diverted the salvage value of the company.

Too many unique situations. Just saying some are good, some are bad.

Hence agreement with regulation.

Without regulation we see vulture capitalism. We see stores getting loaded with debt and then dismantled.

Valentina Dabos, senior campaign and research coordinator at the Private Equity Stakeholder Project, told Newsweek: "While private equity firms often justify layoffs and restructuring as necessary for improving efficiency, the data on bankruptcies suggests a different reality. Private equity firms load companies with unsustainable amounts of debt and leave them financially vulnerable.

Research shows that private equity-owned firms are more likely to declare bankruptcy than their non-private-equity counterparts, often leading to mass layoffs that go beyond "streamlining" and instead reflect financial mismanagement. Additionally, last year saw record numbers of debt-funded dividends at PE-owned portfolio companies, a practice that enriches PE firms and hurts the financial stability of their portfolio companies.

If private equity's goal were to salvage struggling businesses, we would expect to see evidence of long-term operational improvements rather than a pattern of repeated failures. Instead, we see firms prioritizing short-term financial gains over sustainable business health, ultimately harming workers, customers, and communities. The argument that these firms prevent greater losses ignores the role they often play in accelerating a company's decline."

Basically when the p.e. firm decides it's a lost cause (whether that's the correct analysis or not) but instead of having an open and honest liquidation, they abuse bankruptcy law by lending at super high rates, effectively extracting whatever assets remain in the company through interest and fees.

It forces a less-than-orderly liquidation and inappropriately screws the incumbent creditors by jumping ahead and taking all that interest and fees leaving very little for anyone else.

But there are many cases that don't make headlines where the p.e. firm repeatedly injects capital for years until the company can finally succeed.

I think theres reform to be made. P.e. can argue that everyone involved agees to the terms, high interest rates and fees and all, but bankruptcy law should be changed to prevent the abuses.

Perhaps making those high rates and fees subject to clawback might be enough to curb the abuses.