Private Equity and the Future of American Capitalism

Private equity is no longer a niche corner of Wall Street. It has become a powerful force shaping the modern U.S. economy, backing companies that employ more than 13 million Americans and generating roughly $2 trillion in economic output. From hospitals and retail chains to manufacturing plants and tech firms, private equity now touches almost every sector of American business life.

What happens after a private equity firm takes over a company is often far more complicated and consequential than the public realizes. On April 28, the Corporations and Society Initiative (CASI) hosted journalist Megan Greenwell, author of Bad Company: Private Equity and the Death of the American Dream. Moderated by CASI student leader Helen Cashman (MBA ’26), the conversation examined how the private equity model operates in practice and what its growing influence means for workers, customers, and communities across the country.

For Greenwell, the subject was more than a reporting assignment. After years covering politics, sports, and war, her understanding of private equity changed when Deadspin, the sports media outlet where she served as editor-in-chief, was acquired by a private equity firm. Although the site was profitable with millions of monthly views, Greenwell said the new owners quickly pushed for cuts and growth strategies that were uniformed and  disconnected from how the media business actually operated.

“They were fundamentally finance experts and not media experts,” Greenwell said, recalling meetings where executives compared Deadspin’s ambitions to ESPN without grasping the structural differences between the two organizations. She left within months, but the experience prompted a larger question that stayed with her: if private equity could reshape a newsroom this way, what happened when the same model was applied to industries with far greater consequences for everyday life, including healthcare, housing, and local communities? That question ultimately became the foundation for her book.

Cashman raised one of the central tensions surrounding private equity: while critics point to layoffs, wage stagnation, and cuts to benefits under private equity ownership, supporters argue that many struggling companies might have failed anyway without outside intervention.

Greenwell agreed that many of the industries themselves often faced real structural problems long before private equity got involved. The real issue, she said, lies in the financial incentives built into the private equity model, which often reward decisions that inflict the greatest harm.

“I've had people who haven't read the book say you're writing a socialist screed that's anti- capitalist,” she remarked. “But my actual argument is this is a corruption of what free market capitalism was designed to do.”

In Greenwell’s view, companies are traditionally meant to succeed by building sustainable businesses that create long-term value, not by chasing short-term gains at the expense of workers, customers, or the companies themselves.

“In private equity, you can make money whether or not the company you own lives or dies. And that creates this divorcing of incentives that I think is so extreme that all of these workers, all of these communities are being hurt because there is no attempt to actually solve the problems. There's no business innovation.”

Greenwell argued that PE’s focus on generating quick returns, regardless of a company’s long-term health is central to the problem.

“Improving the fundamentals of a business is long, slow, hard work,” she said. “Private equity firms have no interest in long, slow, hard work. They want to get in and get out as quickly as possible. The average lifespan of a deal is five, six years. And ideally, you're getting out before that.”

Greenwell pointed to practices such as sale-leaseback agreements, where PE firms sell off company-owned real estate, pocket the proceeds, and then require the company itself to pay rent on the same properties it once owned. She cited the retail giant Toys “R” Us, which was acquired in a $6.6 billion leveraged buyout by a group led by Bain Capital and KKR, that left the company carrying billions in debt while also taking on new rental obligations tied to locations it had previously owned outright.

As competition from Amazon and big-box retailers intensified, critics argued the financial strain left the retailer unable to invest in modernization, which ultimately contributed to its 2017 demise and the loss of more than 33,000 jobs.

“They went from having so little debt to all of a sudden absolutely crippled by debt and so, shockingly, Toys “R” Us declared bankruptcy and then later liquidated.”

Greenwell mentioned a highly publicized academic study that tracked 484 public companies acquired through leveraged buyouts. It found that about 20% went bankrupt within 10 years, compared to roughly 2% of similar non-acquired companies.

“I think if this were any other kind of business model, we would just look at that and say, okay, that model does not work. It is 10 times less likely to work,” she said. “But because it works for the investors, and for the firms, we, as a society, accept that definition of working rather than actually making the businesses work.”

“That was the thing that really stuck in my craw. It's not supposed to work that way.”

Cashman countered with an argument often made in defense of private equity: many companies acquired by PE firms are already financially fragile, and in some cases, outside investment and operational discipline may help stabilize struggling businesses. Greenwell acknowledged that the picture is more complicated than a simple condemnation of the industry. While the research shows private equity-owned companies are significantly more likely to enter bankruptcy, she noted that most companies do not end up failing.

Greenwell also pointed to the industry’s earlier roots in the 1960s, when so-called “bootstrap deals” often involved investing in small family-owned companies with growth potential but limited access to capital, a model she described as relatively logical and, in many cases, beneficial.

“That is still a lot of what the private equity industry does,” she said. “Not that it works out in every case, but it does serve a purpose and there is a clear logic to that model.”

She highlighted the example of KKR executive Pete Stavros, who helped create an employee ownership initiative at Illinois garage door manufacturer C.H.I.  The effort resulted in factory workers and truck drivers receiving substantial payouts after the company was successfully sold. But she contrasted that example with Toys “R” Us, where many of the laid-off employees did not receive severance because they ranked too low among creditors. In her view, the difference is not simply whether private equity can work, but where and how it is being applied.

The larger concern, Greenwell argued, is that private equity firms have increasingly moved beyond small companies and into sectors that serve foundational social needs. While Toys “R” Us illustrated the risks in retail, she described it as a precursor to the industry’s growing involvement in healthcare, housing, and education.

“When you're talking about taking over a chain of rural hospitals,” she said, “that's just a very different proposition.”

For Greenwell, the stakes become far greater when financial strategies designed for short-term returns are applied to institutions that entire communities rely on for basic stability and care. She described her reporting in Riverton, Wyoming, a rural community whose hospital was acquired by Apollo Global Management in 2018 after it had merged with another hospital that was 28 miles away. Despite already operating profitably as a for-profit institution, the hospital gradually began cutting services, first consolidating specialty care and eventually eliminating basic functions such as obstetrics and general surgery.

Residents who once relied on the hospital for routine medical care suddenly found themselves traveling long distances through dangerous terrain for childbirth, emergency treatment, and even simple procedures. In one example, a child who needed stitches after hours could not be treated locally, contributing to a dramatic increase in costly emergency air ambulance transfers out of the county.

For Greenwell, the Riverton story illustrated what happens when financial strategies targeting retail and consumer businesses are applied to institutions communities fundamentally depend on.

In her view, the larger question is no longer simply whether private equity can improve efficiency, but what society is willing to lose when essential services are treated primarily as financial assets.

Cashman asked Greenwell what single reform she would make if she could redesign the rules governing private equity. Greenwell emphasized that she approaches the issue as a reporter rather than an activist, focusing primarily on documenting the system and the people affected by it. She pointed to closing the “carried interest loophole” as an obvious reform that has repeatedly stalled in Congress despite bipartisan support from presidents including Barack Obama, Donald Trump, and Joe Biden.

“It can never get through Congress because 88% of members of the house and Senate take private equity donations.”

Greenwell argued that a more consequential change would involve shifting financial responsibility within the industry itself. Specifically, she said PE firms should be required to share responsibility for the debt loaded onto the companies they acquire. In her view, one of the core problems with the current model is that firms can profit even when portfolio companies struggle or collapse, while workers and communities absorb most of the consequences.

While she acknowledged that many in the industry would resist such changes, Greenwell argued that what it comes down to is greater accountability: firms that create the risks should also share in the consequences when things go wrong.

The conversation concluded with a question aimed at students preparing to enter the private equity industry. Greenwell encouraged them to think carefully about the relationship between their work and their personal values.

“How does this company that I am working for align with my values? And how does it not? And how can I allow my values to guide my choices? I think that is a question that everybody should be asking themselves throughout their career.”

She noted that priorities and perspectives change over time. The most important thing is to remain self-aware enough to recognize when professional choices reflect, or conflict, with those evolving values.

“Stay in tune with yourself. Stay in tune with what you want out of your career, but also out of your life. And do your best to make choices that align with that.”