Private equity faces existential crisis in US as unsold companies pile up
Private equity, which owns firms employing over 13 million Americans, faces mounting strain as high interest rates and rising buyout prices leave funds unable to sell thousands of portfolio companies at desired prices. The model relies on loading acquired businesses with debt while planning to sell within a few years, but that exit strategy has been disrupted, raising fears that heavily indebted firms could collapse, threatening jobs and vital services in the communities that depend on them, from rural hospitals to local dentists.
Recent collapses illustrate the risk: retailers Saks and Eddie Bauer have filed for bankruptcy, Kmart and JoAnn Fabrics have closed permanently, and hospital operator Steward Health Care's collapse cost thousands of jobs and left communities without local healthcare. PitchBook data shows more than 13,500 unsold companies sitting in US private equity portfolios, including 2,563 consumer products and services firms and 1,536 healthcare companies, many held far longer than usual. Industry figures such as the American Investment Council's Will Dunham insist firms' financial backing will help businesses weather the downturn, while critics including the Private Equity Stakeholder Project and the Roosevelt Institute warn that unless intervention occurs, further collapses are likely.
- Private equity struggles to sell over 13,500 debt-laden US portfolio companies
- High interest rates have disrupted firms' usual buy-and-sell exit strategies
- Collapses like Steward Health Care show risk to jobs and local services
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Critics argue this is a genuine systemic warning rather than an isolated cyclical hiccup: over 13,500 unsold companies, many loaded with debt taken on when rates and valuations were far more favourable, represent a real risk to the millions of workers and communities who depend on them. They point to Steward Health Care, Kmart and JoAnn Fabrics as evidence that when the debt-fuelled model meets a prolonged exit drought, the consequences fall hardest on ordinary employees, patients and small towns rather than on fund managers, who can often extract fees regardless of outcome. On this view, greater transparency, tighter limits on leverage, and closer oversight of sectors like healthcare are prudent safeguards against a wave of preventable collapses.
The case against
Industry advocates counter that private equity firms have weathered downturns before and bring precisely the kind of patient capital, operational expertise and financial discipline that stressed businesses need to survive a difficult stretch of high rates and expensive deals. They note that holding companies longer than usual is not itself evidence of failure, but often a rational response to a temporarily poor selling environment, and that firms have strong incentives to nurse portfolio companies through rather than let them fail, since their own returns depend on it. From this perspective, isolated bankruptcies make headlines but do not prove the model is broken, and heavy-handed intervention risks starving otherwise viable businesses of the very capital and flexibility that helped them survive in the first place.
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