Today’s topic is going to make you feel insane. Like you’re literally losing your mind. But I promise we’re not making it all up.
If, as you’re reading along, you find yourself going back over a sentence four or five times just thinking, “that can’t possibly be right,” or even “that has to be a typo, she clearly meant to say something else”… then congrats! You’ve read everything correctly!
Your ability to actually absorb the information I’m about to impart is contingent upon your Mindhunter-like ability to step into the head of a coldblooded psychopath. So c’mon, Clarice, let’s go!
Because of course, today we’re finally getting around to telling you about private equity.
In researching for this article, I read three very helpful books:
- Plunder: Private Equity’s Plan to Pillage America by Brendan Ballou
- These Are the Plunderers: How Private Equity Runs and Wrecks America by Gretchen Morgenson and Joshua Rosner
- Bad Company: Private Equity and the Death of the American Dream by Megan Greenwell
Using words like “plunder” and “pillage” when it comes to private equity is pretty apt. For like the viking hordes of old, contemporary private equity plunderers swoop in to take what they want to enrich themselves and leaving what’s left to crumble and burn.
I highly recommend these books if you want a more in-depth explanation of the ills of private equity, leveraged buyouts, and unregulated capitalist practices. This here is an overview. An amuse-bouche of kleptocratic insanity. By contrast, the authors of these books do a much better job than me of not sounding like unhinged weirdos while they present the results of years of rigorous journalistic inquiry.
Just wanted to establish my sources so you know I’m not making this shit up.
I really wish I were.
What private equity isn’t
To explain what private equity is, I need to start by explaining what it isn’t. So let’s begin with the fundamentals of capitalism and investing. It’ll be fun, I promise!
Pure, unadulterated capitalism
So there’s this guy, Milton Friedman. He’s basically the patron saint of free market capitalism. He’s also universally beloved by Ronald Reagan, Margaret Thatcher, and the kind of guys who self-identify as “disrupters” at their 20-year high school reunions. So. Y’know.
Personally… I’m not a huge fan! Following his dictates about pure, unadulterated capitalism to the extreme has caused a lot of human misery. Plus he was probably a real drag at parties!
Back in the mid-twentieth century, Milton Friedman was the guy who really established the meaning of free market capitalism and the fiduciary duty of business owners to their investors. Part of his philosophy is that a business’s entire purpose is to make money for the owners of the company. Whether those company owners are a single person or family, the employees, or the shareholders.
Got that? Any and all businesses have the purpose—nay, the sacred duty—of making their shareholders as much money as possible. Thus spake Friedman.
This is why we regulate capitalism
Taken to the extreme, a capitalist might do horrific things in the name of owner profit. They might—and I’m just spitballing here!—pollute a water source because it’s cheaper than safely disposing of their chemical waste. Or kneecap efforts to develop clean energy sources in favor of growing their fossil fuels empire. Or maybe even conceal the addictive properties of a pharmaceutical drug, leading to the death of thousands!
This is why our government regulates the practice of business. We have laws about how businesses can use our air, water, and land, how they must treat their employees, and how their products can affect the health and safety of consumers.
The federal minimum wage is a great example of this kind of regulation. Companies could make more money for their owners if they paid their employees less. So regulators have to step in and remind them that slavery… is bad.
Think of governmental regulations as the chemotherapy keeping the cancer of capitalism in check. And if that metaphor sounds explicitly negative… good! Now, comrades, you understand my true feelings on unregulated capitalism. Because without regulations, we couldn’t trust 100% of business owners to do the right thing 100% of the time.
How traditional investing works
Also carefully regulated is how various parties profit from their investments. And there are lots of ways to profit from a business:
- You can start the business yourself and run it. That’s what we’re doing here with our little factory for feminist anti-capitalist money nerds.
- You can also buy someone else’s business and run it. Ideally, you’ll make back the money you paid the original owner by running the biz in a profitable, steady manner.
- Then there’s the third and most common way to profit: buying a tiny slice of a business and trusting its current management to make good choices that grow the company’s future value. This is commonly known as investing in a company’s stock, making yourself a shareholder. You share in the company’s increasing value because you hold its stock. (Ain’t language neat?)
You can learn more about traditional investing in much more depth through our masterpost, “Everything You Need to Know about Investing for Beginners.”
Profit is more than return on investment
These methods of profiting from business are straightforward. They also have a few things in common:
- In all of these cases, you’re investing in the hopes that the company will become (or remain) stable, profitable, and enduring. People usually plan to keep these investments for years. Because they require long-term planning and vision, business owners tend to be cautious lest major unforeseen changes and disruptions sink their battleships overnight.
- You’re at personal risk. You might double the money you invested, or lose it all. There’s an incentive to choose wisely from among potential investments and make good choices to help it stay strong. The more you have invested, the more risk you assume.
- Also, the more you have invested, the more work you personally need to do. Someone with just one stock in a company doesn’t need to do much… but a business owner has to work really hard. This work is multidimensional. You have to balance your need for profit with what customers want, what employees need, what competitors are offering, and dozens of other factors.
Let’s say I invest in a company—Lorax & Co.* Their patented tree-translating technology allows anyone to understand what the trees have to say. I see a lot of potential for profit from their services, and I want in on it!
So I go to the stock market and I buy one share of Lorax & Co. stock, making me a shareholder in Lorax & Co. I own a tiny slice of the pie that is their overall company. And that tiny ownership slice entitles me to a share of their profits.
It’s the responsibility of Lorax & Co.’s management to ensure high investment returns for shareholders like me. When they make money, the value of my stock goes up. And when they lose money, the value goes down. The goal is that when I sell my share of Lorax & Co. stock some day, it will be more valuable than when I bought it.
What makes private equity different
Companies buy, sell, and merge with each other all the time (Traditional Investing Method #2, see above). And on its surface, a private equity buyout can look a lot like these standard corporate mergers.
But those kinds of investments are for Other Girls. And private equity… is Not Like Other Girls.
The difference between private equity and traditional investing lies deep in its mysterious financial structure. The way private equity firms use debt is something akin to Black Magicke, but more powerful. Aleister Crowley could never!
Due to bad press, private equity plunderers have rebranded as “alternative investment managers” and “global investment firms.” Nice! Sanitized! Are we still doing very mindful very demure? Somebody born after the Clinton administration weigh in. Anyway, in the ’80s we just called them “corporate raiders.”
When a private equity firm purchases a company, the process is known as a leveraged buyout. And this is generally how it works:
Step 1: The private equity firm buys a business
They finance this purchase not with their own money, but with money raised from a group of external, private investors. Sort of like how you or I would borrow money from a bank to buy a house.
Note that these are private investors. Not just anyone can buy into the private equity purchasing pool. It’s a separate game from the stock market where you and I should be cautiously investing your retirement fund.
Step 2: The PE firm loads its new purchase down with debt
Private equity places the debt from buying the business on the financial statement of the business it purchased. Essentially, this makes the purchased business responsible for the cost of its own purchase.
In addition, the PE company charges its newly purchased asset some management fees and various other bills that add to its debt burden. In this way, it becomes very expensive, very fast to be owned by a PE firm.
Step 3: The PE firm maximizes the profits of its newly purchased business
This might mean they cut costs, fire staff, switch to cheaper suppliers of material, and shorten processes. Maybe they even raise prices just for good measure.
A friend of mine is an ICU nurse in a hospital that deliberately understaffs the nurses in her department on every shift. The nurses have asked—begged, even—for appropriate staff per shift for the sake of their patients. To no avail.
Private equity owns the hospital, of course.
Step 4: The PE firm bleeds the business of assets and profits until it can no longer afford to function
This step doesn’t happen 100% of the time… but it does happen to a startlingly high number of PE-owned businesses.
This happens because the purchased company is so burdened by debt and PE management fees that even while operating a perfectly lean and profitable business… it can’t possibly remain profitable. Its debt outpaces its profits by leaps and bounds.
Step 5: The PE firm strips the business for parts and moves on to its next conquest
Over this whole process, private equity comes out ahead. They collect management fees. They sell off assets like land and buildings, often renting them back to the original owner in a practice known as “sale-leaseback.”
Because they weren’t personally repaying their investors for the money they borrowed, their personal investment was technically quite low! So it’s mathematically quite easy for a PE firm to come out ahead, even (especially???) when the business they buy goes out of business. Then they can take the money they made off the death of that company and repeat the whole process again with another unsuspecting business.
A simplified metaphor
If the life cycle of a private equity firm has your head spinning… fear not, my child. I’m going to break it down for you with a metaphor specifically designed to distract you from the abysmally boring logistics of white collar warfare and put you in a sunny fucking mood!
The most confusing part of private equity is its financing model. This is simultaneously where I lose most of you and where private equity hides its inherent evil.
Return to Step 1, above. Private equity firms go into debt to buy companies. In recent history, though, corporate interest rates have been insanely low, which makes the PE model appealing to firms looking for low-risk, high-reward purchases. See, their debt structure involves a firm manager and multiple wealthy investors able to get big loans to buy into the private equity’s business-buying fund. What this means is that none of these assholes need to have much liquid cash on hand to outright buy, say, recent PE victim Joann Fabrics. Enough of them just need to get individually approved for loans that they can join forces under the wings of the private equity firm’s manager.
Now, Step 2 was the point in my research where I was first like “How the fuck is this legal?” Because it really does not seem right that a firm can buy a company and place the debt they borrowed to make the purchase ON THE ACQUIRED COMPANY’S BALANCE SHEET. It does not seem right that the company that gets bought is responsible for… [checks notes] paying for itself.
Bank of the Bitches and the Tortured Cow
So let’s say I go to the Bank of the Bitches for a loan to buy a dairy cow. When I buy the cow, I tell her she’s responsible for paying back the BotB.
“That doesn’t sound so abnormal,” say you, a RUBE, “Lots of people and companies pay back debt with profits.” But that’s where you’re mistaken. For my cow’s debt (and it is her debt, not mine mind you) won’t be paid off with profits. Those profits belong to me and I expect to collect them immediately… along with the management fees the cow owes me for all my valuable milk-production insights. And the rent for her pasture. She owes me that too.
No, this poor dairy cow has to figure out a way to pay off the debt using her normal operating budget. Maybe she can cut back on the amount of milk she feeds her baby cows (or calves, as they’re colloquially known—me, I like to call them “future shareholder value”). Or maybe she can just exhaust herself producing more milk than normal. I don’t know and I don’t care… because I’m not responsible for the debt.
This cow is but one cow in my barn, each of whom represents a different piece of my international milk conglomerate. And each of them comes with her own annual financial statements and balance sheets. Technically, when you look at the paperwork, she bought herself, you see.
And when poor Bessie burns out or her udders run dry or whatever happens to overmilked cows, I’ll just chop her up and sell her to the nearest butcher for top dollar. It’s all profit and no loss for me, the private equity cow-torturer!
What if my dairy cow can’t pay off the debt? What if she defaults, or misses too many payments? Well, then the Bank of the Bitches is taking her to collections, at which point they’ll write off most of the debt as a loss. My credit—not to mention my wallet—will go completely untouched. Because it’s not my debt. It’s the cow’s debt. It’s not mine, it’s hers! And the bank can take it out of her in flank steaks for all I care.
At this point I really hope you’ll join me in asking, “NO BUT SERIOUSLY HOW THE FUCK IS THIS LEGAL???”
I’m oversimplifying with, y’know, cows… but according to my research this is an accurate description of the private equity debt model. Private equity firms repeat this process with so, so many cows. They build a portfolio of cows, all responsible for the debt of their own sales to the private equity firm. And they can use each of these acquisitions as collateral to get more loans to buy more cows.
It is this weird debt model that sets private equity acquisitions apart from traditional investing. The point is to get something for nothing… and then to squeeze as much fresh milk out of it as possible before killing it off.
The billionaire machine
Private equity is known as the “billionaire machine.” Because if you already have multiple millions, PE makes it possible to reinvest that money to make game-breaking, barf-inducing levels of money without any real risk or, uhhh… work.
There are a few basic problems with this magical billionaire generator, however. Besides all the innocent cows slaving under the weight of corporate debt, of course.
They don’t give a shit about people
Far from having an emotional attachment to the company, PE firms usually don’t know or care about what the company even does, who its customers are, or which employees have been waiting in line for a raise. Greenwell’s book Bad Company is entirely about this aspect of private equity. It’s heartbreaking.
The very fact that private equity is allowed to purchase hospitals and nursing homes is a human rights violation of the highest order. I’m not exaggerating.
Mortality rates in nursing homes owned by private equity are 10% higher than in other nursing homes. 20,000 unnecessary patient deaths occurred after a private equity firm purchased a nursing home. Morgenson details just such a tragedy in These are the Plunderers. Staff members, residents, and the relatives of residents recounted horror stories to her about how the nursing home was so understaffed that elderly and disabled residents were left unattended during medical emergencies. This led not only to preventable deaths, but to untold emotional trauma and worsening health conditions.
None of that needed to happen to the residents of those nursing homes. But the PE firms that own these facilities want to maximize profits… literally at the cost of patients’ lives, comfort, and dignity.
No risk, all reward
The structure of private equity is such that investors play without any risk to their already massive personal wealth. They win if they win and they win if they lose. And along the way, they’re shielded from even the legal consequences of actionable mismanagement. That means they have no incentive to make good choices, long-term investments, or even to follow the letter of the law.
The irony of private equity’s virtual lack of risk can be found in the PE ownership of prisons and services inmates rely on. Millions of prison inmates are bled dry for commissary purchases, phone calls to family members and lawyers, and access to educational resources. Meanwhile, the private equity firms charging their literal captive customer base are getting away with white collar crimes for which they will never, ever see the inside of a prison cell.
Wham, bam, thank you ma’am
PE investments are often short-term. They get in and out quickly, extracting as much value as they can along the way. This creates unpredictable bursts of instability for customers, employees, and honest business owners.
This is creating an insanely concentrated risk. 70% of large U.S. bankruptcies in the first half of 2025 were private equity-backed companies. They’re plundering the American public of its hard work, risk-taking, and innovation, giving us nothing back but increasingly unaffordable lives and an ever-growing risk that our worst crashes and recessions will just keep happening on a ten-year cycle until the Machines take pity on us, shove us into our goopy bioelectric tubes, and lets us play Farmville all day at our boring desk jobs inside the Matrix.
Toys”R”Us is a great example of this kind of short-term pillaging. Private equity firms KKR and Bain Capital took a company that literally invented the concept of the category killer and drove it out of business within 13 years. Along the way it unilaterally deprived 30,000 employees of their severance funds and stable, middle-class jobs.
Those former employees had to fight tooth and nail for a measly $2 million settlement after the private equity firms canceled their promised benefits package. Meanwhile the firms paid their legal representation $56 million to fight back against paying the workers severance.
The Negative Impact
If private equity seems like a massive scam, that’s because it is.
The entire PE model is devouring the foundations of our economy like so many termites in a charming, turn-of-the-century craftsman bungalow. And here I’m literally just going to take a page from Morgenson and Rosner’s These Are the Plunderers:
Companies absorbed by private equity have worse outcomes for everyone but the financiers: employees are more likely to lose their jobs or their benefits; companies are more likely to go bankrupt; patients are more likely to have higher healthcare costs; residents of nursing homes are more likely to die faster; towns struggle when private equity buys their main businesses, crippling the local economy; and school teachers, firefighters, medical technicians, and other public workers are more likely to have lower returns on their pensions because of the fees private equity extracts from their investments. In other words: we are all worse off because of private equity.
Well, not all of us. Bain Capital, Blackstone, Carlyle Group, and Apollo Global Management—some of the biggest perpetrators of private equity’s crimes—are doing quite well. By Blackstone’s own admission, private equity investments have historically outpaced the public stock market.
Party City, Big Lots, Red Lobster, Forever 21, Toys”R”Us, Joann Fabrics… it’s not that these private equity victims are some sort of paragons of corporate virtue. Plenty of them built their success by driving smaller, independently owned stores out of business.
I’m not bemoaning the loss of Party City because I simply need to buy a weekly pack of penis-shaped plastic party straws (though I do). And I’m perfectly able of cooking Red Lobster’s cheddar biscuits at home, thank you very much! But when private equity destroys a company like Joann Fabrics, it leaves a region without an employer, workers without jobs, a community without access to supplies they need.
And it’s not just retailers falling prey to private equity. Prison inmate services, nursing home chains, mobile home parks, supermarkets, pension funds, and hospitals are all being absorbed by the creeping blob of private equity. And when that happens, people lose their homes, their access to fresh and nutritious food, their retirement funds, their medical care, and yes, their lives.
Why is this allowed to happen?
For some reason, despite the demonstrable damage the PE model does to individuals, communities, and our economy at large, it’s still perfectly legal. It’s probably because the typical perpetrator of private equity plundering is a man in a very expensive suit. And we all know they’re a protected class!
Remember 3,000 words ago when I talked about government regulations on corporate practices? Yeah, those kinds of regulations are thin on the ground when it comes to private equity.
Well, that’s not exactly true. Private equity is regulated… to minimize risk for investors and the market! The risk to employees, patients, customers, retirees, and communities… well, that’s a bit harder to quantify without getting in the way of shareholder profits.
In an interview with the Institute for New Economic Thinking, Brendan Ballou, author of Plunder, was summarized as saying:
This is something different—an industry that has metastasized into a job-killing, business-destroying, community-crushing machine the likes of which we haven’t seen since the money trusts of the nineteenth century. In other words, it’s predatory capitalism on steroids. Most worrisome of all, in Ballou’s view, is the fact that these firms have almost no accountability to the U.S. legal system.
This lack of accountability is a lot like why MLMs are legal despite being obvious scams. They have enough money to lobby Congress to make absurdly unethical (or nonexistent) regulations.
So while every rational person can see the nonsense of private equity with the naked eye, there’s some senator who’s like “NUH UH I WANT A VACATION HOME ON THE VINEYARD.”
Can government regulation help?
Senator and BGR superfan** Elizabeth Warren is (unsurprisingly) working to pass legislation that would more heavily regulate private equity. The idea is to close the loopholes enabling the business model and disincentivize the uber rich from engaging in the kind of harmful shitfuckery that makes private equity so cartoonishly evil in the first place. If she succeeds, the legislation will break the “billionaire machine” down into something much more like a multimillionaire machine.
Which is to say: it won’t be enough. But it’s a start.
What more can we do?
The only answer is to regulate private equity out of existence AND to tax the wealthy. Because as soon as we close this loophole, they’ll be on to the next one.
Multimillionaires are like Xenomorph eggs: if we let them progress to face-hugger stage or—god forbid!—chest-burster stage, we’ll have to work together as a species to focus all our efforts on destroying them immediately. Because once they grow limbs and start seriously ambulating, we are FUCKED.
Whether we try regulation to close loopholes or increasing taxes on oligarchs, we have an uphill battle ahead of us.
We need courageous government representatives who cannot be bought or intimidated. And under the current administration, there is little hope of PE ever getting curtailed (but their day of judgement will come, and that right soon).
Historically, we only seem to be able to close these unregulated capitalist loopholes on the heels of them doing catastrophic damage to the world economy. The Dodd-Frank Act, for example, had a ton of incredibly valuable Wall Street reforms. But it could only pass due to the howling rage everyone felt after the 2008 financial crisis.
That time will come for PE, and I don’t think it’s far off. When it happens, they’ll try to deflect blame onto anyone other than themselves—poor people, immigrants, socialists… you name ’em, they’ll blame ’em. We need an educated populace that can’t be bamboozled by finger-pointing and a powerful PR machine.
So send this to somebody ya love. And if you hear private equity is coming for a business you love or even just rely on… get loud.
ON THE NEXT EPISODE OF BITCHES GET RICHES…
The dramatic return of a past BGR guest star (spoiler alert IT’S MARKET BASKET)!
A real life private equity takeover that’s happening right heckin’ now!
A look into the sad, demented lives of the sort of weirdos who would do such a thing!
A look into the sad, demented lives of the sort of weirdos who spend their evenings and weekends combing through public records to expose the greedy excesses of the previous weirdos!
The Bitches on location!
BGR’s Cribs!
We’ve got all of that and more coming up next time. So stick around, kids. We promise not to torture any more cows… nor any more metaphors.
* Of course I named my fictional company after Dr. Seuss’s anti-capitalist, environmentalist classic. Have you learned nothing from us???
** We’re practicing the law of attraction here. If we can manifest Warren into being a member of Bitch Nation, we will die happy!
