Despite controlling only 6.5% of the US economy, private equity firms were responsible for 56% of large corporate bankruptcies in 2024—a startling disparity that suggests systemic risk. Beneath the glitzy promise of reviving faltering businesses is a pattern of aggressive financial engineering—leveraged buyouts, cost cutting, and asset stripping—which frequently destroys iconic American brands and leads to the loss of jobs and the instability of communities.
Nine actual cases are presented in this article that demonstrate how private equity’s emphasis on short-term gains has harmed companies that many Americans depend on. It shows the grave dangers of prioritizing short-term financial gain over long-term business viability.
1. Forever 21
A once-loved retailer is a good example of the dangers that private equity ownership can bring. The business was heavily indebted after being acquired by Authentic Brands and its partners, including Leonard Green & Partners, through a leveraged buyout.
Even when they own only a small portion of the company, private equity firms’ aggressive cost-cutting efforts resulted in declining inventory and unsatisfactory customer experiences. These modifications rapidly diminished the value of the brand. Forever 21 could not recover from its more than $1 billion debt. Its end demonstrates how short-term profit strategies can destroy recognizable retailers.
2. Joann Inc.
Despite 96% of its stores still having positive cash flow, craft retailer Joann Inc. declared bankruptcy twice in a single year. Joann had more than $1 billion in debt during its purchase by Leonard Green & Partners in 2011 for $1.6 billion.
Its debt load was cut in half during the first bankruptcy, but a second filing resulted from financial engineering and vendor disputes. This case dispels the myth that bankruptcy indicates operational failure by exposing how private equity’s debt-driven model can destabilize even profitable businesses and endanger thousands of jobs and supplier livelihoods.
3. Steward Health Care
After ten years under Cerberus Capital Management, Steward Health Care, the biggest private hospital operator in the United States, declared bankruptcy in 2024. Over 2,650 people were laid off due to Steward closing six hospitals and reducing essential services like obstetrics and cancer care due to liabilities exceeding $9 billion.
The report from the Senate Budget, which consists of a 170-page report, demonstrates that private equity ownership frequently results in greater expenses and worse care quality. These companies are criticized in the report for prioritizing profits over patients.
4. Red Lobster
When Red Lobster filed for bankruptcy in 2024 while under private equity ownership, workers lost about 6,360 jobs. Red Lobster, once a top brand of American dining, suffered from unmanageable debt and cost-cutting measures that hampered service and growth.
This case illustrates how the leveraged buyout model of private equity, which accelerates decline through aggressive financial tactics and underinvestment, can erode consumer-facing brands. Red Lobster’s demise shows how vulnerable well-known brands can become when owned for monetary gain.
5. 99 Cents Only Stores
The 2024 bankruptcy clearly shows how private equity has harmed the discount retail of 99 Cents Only Stores, which employed 10,800 people. Even after serving price-sensitive consumers, the company was loaded with debt and subjected to aggressive cost reductions, undermining competitiveness.
This bankruptcy is a part of a larger pattern in which sectors that depend on thin margins are more vulnerable due to private equity ownership and volume sales. The results do not exclude widespread layoffs and disrupted access to affordable goods for low-income communities.
6. Careismatic Brands
Careismatic Brands, a significant provider of medical uniforms, declared bankruptcy in 2024 and laid off 404 workers. The private equity-owned company was instrumental in helping healthcare workers throughout the United States. Its abrupt collapse upset critical supply chains, making it more difficult for frontline employees to obtain the gear and uniforms they depend on daily.
As this case illustrates, weakening vital suppliers in important industries is a more profound and frequently disregarded effect of private equity’s aggressive financial strategies. Beyond job losses, the impact increases strain on already overburdened healthcare systems and jeopardizes patient safety.
7. Party City & Joann
Party City and Joann were among the 25% of consumer discretionary sector failures due to private equity-backed bankruptcies in 2024. These businesses, essential to American crafts and festivities, suffered from excessive debt loads and cost-cutting measures that hindered customer satisfaction and innovation.
The sector’s vulnerability under private equity ownership calls into question the idea that financial sponsors propel growth; rather, they frequently hasten decline by putting short-term profits ahead of long-term brand health.
8. Prospect Medical Holdings
After accruing over $1 billion in debt, Leonard Green & Partners’ Prospect Medical Holdings declared bankruptcy in early 2025. The collapse: prioritizing profits over patients and long-term care illustrates a larger issue with private equity in healthcare.
Senate investigations revealed some concerning indicators, such as strict cost-cutting measures, staff reductions, and postponed building repairs—all done to save money. Due to these decisions, patients found it challenging to receive the required care. Prospect’s negative outcome is a painful reminder of the outcomes of profit over assisting others in recovery.
9. The Private Equity Scalping Epidemic and Its Broader Implications
A systemic crisis is indicated by the disproportionate role of private equity in major U.S. bankruptcies, more than half in 2024. This financial model frequently forgoes operational viability and stakeholder welfare in favor of short-term gains because it depends on high debt and quick cost-cutting.
Some cascading effects include mass layoffs, community instability, and declining public confidence in vital services. The policymakers must carefully look into the expanding role of equity and make it a point to strike a balance between accountability, long-term economic viability, and capital efficiency. America runs the risk of losing not only businesses but also the social fabric they uphold if reform is not in place.
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