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Generally, an ordinary investor isn’t putting their money directly into a private equity fund. Then, they sell them to another firm, take them public, or find some other way to offload them. These organizations buy companies that are struggling or have growth potential and then try to repackage them, speed up their growth, and - theoretically - make them work better. Private equity firms are, as their name suggests, private - meaning they’re owned by their founders, managers, or a limited group of investors - and not public - as in traded on the stock market. (Some of Vox Media’s investors may do leveraged buyouts, but Vox is not a leveraged buyout play.) But for the purposes of this story, and what you’re often hearing about in high-profile cases, we’re talking mainly about leveraged buyouts, where private equity firms buy companies basically by loading them up with debt. The term private equity can encompass a lot of different types of firms, including venture capital firms and hedge funds. “And they certainly aren’t protecting their companies from a rainy day.” Private equity’s business model hinges on debt. “Most of the time, private equity firms I do not believe are trying to drive the companies into bankruptcy, but it is what happens enough of the time to be disturbing,” said Josh Kosman, author of The Buyout of America and an expert who appeared in that PBS NewsHour segment back in 2010. The more cynical read: Maybe Toys R Us would have had a better chance at adapting if it hadn’t been saddled with private equity-induced debt. Is private equity a giant money monster that eats up companies and spits them out as the husks of what they once were?Īn AIC spokesperson said in a statement said that private equity firms worked “for years to strengthen and save” Toys R Us and blamed a “challenging retail and e-commerce environment” on its demise. Industry advocates argue they’re taking on risk a lot of other investors would eschew, and it’s only fair they be rewarded. Is private equity a giant money monster that eats up companies and spits them out as the husks of what they once were, prioritizing short-term gains over creating long-term value and doing a ton of damage to everyday Americans in the process? Or does it, as some in the industry would suggest, just have a PR problem? Their argument: Sure, sometimes things go wrong, but private equity wouldn’t be in business - and have the money invested it does - if it didn’t often succeed as well. The Hollywood writers’ gripes? Same thing. Surprise medical bills? A private equity link. Taylor Swift has placed blame on the “ unregulated world of private equity” for a battle over her music. Private equity was involved in the downfalls of Payless Shoes, Deadspin, Shopko, and RadioShack. The private equity industry has been under public scrutiny for years, but lately, it seems like it’s been in the headlines more. So did the three firms that bought up Toys R Us - and, eventually, saw it go under. The Private Equity Council, now rebranded as the American Investment Council, kept trucking along. And all those employees? They lost their jobs. Toys R Us never went public it went bankrupt seven years later, in 2017. “ou don’t report that Toys ‘R Us was saved from likely bankruptcy by PE owners, that it has more employees working for it than it did before it was acquired, and that it is on the verge of returning to the public equity market,” he wrote. He noted some “concerns” the group had with the show’s piece, including that it had ignored “hundreds of examples of PE success stories.” His chosen example: Toys R Us, which had been bought out by a trio of firms in 2005. In July 2010, Doug Lowenstein, CEO of lobbying group the Private Equity Council, wrote a letter to PBS NewsHour after a segment it had aired on the private equity industry.