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 aren’t. The industry’s 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 weren’t 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.)
