Are PE-Backed Companies More Likely To Go Bankrupt? It’s Complicated.
The oft-cited fact stems from a study of pre-GFC data – in recent years, the opposite was true. But post-Covid, things have started to backslide… especially in two key sectors.
Most anti-private equity activists will cite a famous 2019 study by California State Polytechnic University researchers Rastad and Ayash that finds that private equity-owned companies are 10x more likely than their non-private equity-owned counterparts to go bankrupt.
The study uses data from LBOs that occurred between 1980 and 2006, pre-Global Financial Crisis. These were the days of private equity deals like Nabisco and Toys R Us – deals that quite publicly played out in a bad light. And their findings were accurate for deals of that era.
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