Private equity faces existential crisis in US as unsold companies pile up
Summary
Private equity firms in the US are facing a big problem because they have many companies they bought but cannot sell yet. These companies often have lots of debt, and high interest rates are making it harder for private equity to make profits. This situation could affect many employees and local communities.Key Facts
- Companies like Saks, Eddie Bauer, Kmart, JoAnn Fabrics, and Steward Health Care, once owned by private equity, have gone bankrupt or closed.
- Private equity firms own many US companies, employing over 13 million people, including retailers, healthcare providers, and startups.
- Around 13,500 companies owned by private equity in the US have not been sold, some held much longer than usual.
- High interest rates and rising prices make it difficult for private equity to sell companies at their desired value.
- Many companies owned by private equity carry large amounts of debt, increasing the risk they could collapse.
- These companies provide important services and jobs, so their failure could harm communities.
- Private equity leaders say they have enough money to help their companies through tough times.
- The business model works like buying a house with a loan, but companies, not buyers, have to repay the debt.
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