Kmart. Sears. Toys “R” Us. Joann’s.
Hear those names and you probably think of businesses gone belly up. All of them were purchased by private equity firms in something called a “leveraged buyout.”
Eddie Lampert bought Kmart with a leveraged buyout, shuttered stores, and sold off the property Kmart owned. Then in 2005, he had Kmart buy Sears. Both are textbook examples of how private equity’s financial engineering hollows out at the expense of workers and communities.
That financial engineering begins with taking loans out in the name of the company (not the firm) and using the company’s assets as collateral.
Lampert led the pack on retail acquisitions, buying up Kmart’s debt before bankruptcy, then shifting the business toward cutting costs, selling off valuable real estate and eventually spinning off or selling core brands like Craftsman and Lands’ End—moves that generated cash for investors while leaving the retail operation weaker year after year.
Toys “R” Us demise followed a similar path after its 2005 leveraged buyout by private equity (PE) firms KKR and Bain Capital (co-founded by Mitt Romney) and real-estate investor Vornado: a $6‑plus‑billion deal funded mostly by debt piled onto the company itself, more than $5 billion in total, with roughly $400 million a year going just to interest payments before the chain finally liquidated and 33,000 people lost their jobs.
Private equity seems like an abstraction to most of us, but Megan Greenwell’s Bad Company: Private Equity and the Death of the American Dream shows how it’s linked to worse healthcare and increased government corruption on top of job loss.
Greenwell’s book was the March selection of the League of Women Voters’ Well-Read Citizen Book Club. Greenwall wants Americans to know that private equity is reaching into almost all facets of their lives and extracting value from companies for its owners’ gain.
When most people say “private equity,” they mean leveraged buyouts: firms pool capital from pension funds, university endowments, and ultra-wealthy individuals, then borrow far more from banks to buy a company. Crucially, the PE firm that borrows the money is off the hook for repaying it because it was borrowed in the name of the company.
That model contrasts greatly with venture capital. Venture capital supplies growth equity to young firms that have few assets and little debt; the goal is to help them scale and then profit if a small number of bets succeed. Private equity targets existing companies, including family firms and underperforming organizations.
Greenwell structures Bad Company around four people whose lives were upended by that logic: one each from the retail, health care, housing, and local media sectors. In retail, we meet Liz, a devoted Toys “R” Us worker who took such pride in her job that repeat customers sought her out by name and a grateful family even named their adopted baby after her. When the private equity owners decided the chain was no longer in their interest, Liz and 33,000 coworkers were dismissed with no severance despite contracts that promised it, their loyalty and skill suddenly irrelevant next to the balance sheet.
In health care, Roger, a doctor in rural Wyoming, watches a private-equity-owned hospital chain strip his small community hospital for parts—cutting staff, consolidating services, and prioritizing cash flow over care—until he fears he will die having left his town worse off than he found it. The housing narrative follows Loren in Northern Virginia who sees private equity landlords buy her apartment complex, raise rents, and let conditions deteriorate while neighbors with few resources struggle to fight back. And in local media, Natalia, a reporter for IndyStar, among other Gannett Company journalists.
Companies owned by private equity firms are ten times more likely to go bankrupt than others. Industry leaders present themselves as “specialists” who rescue struggling firms, but the data show they are specialists in finance. Their job is to make money for themselves and their investors, not for workers or communities.
The pattern is especially troubling in health care. Nationally, almost 500 U.S. hospitals—about 8.5 percent of all private hospitals and over 22 percent of for‑profit hospitals—are owned by private equity firms. Studies summarized in the Private Equity Stakeholder Project’s hospital tracker show that after the acquisitions, hospitals often carry higher debt, cut staff and close less profitable services, with measurable harm to patients: one large study in the Journal of the American Medical Association found hospital-acquired complications, including sharp increases in falls, central-line infections and surgical-site infections, rose 25 percent after private equity purchases. CMS star ratings also skew lower at private equity-owned hospitals; 1‑ and 2‑star ratings are far more common and 5‑star ratings far less common than the national average, suggesting systematically worse quality where the private equity model takes hold.
Indiana is very much on this map. 17 of Indiana’s 166 private hospitals—about 10.2 percent—are PE owned, including facilities tied to major chains like Apollo’s Lifepoint/ScionHealth and One Equity Partners’ Ernest Health network.
Private equity also owns major dental chains that serve Indiana communities, including Aspen Dental Management, backed by Leonard Green & Partners, which operates hundreds of clinics nationally, and other dental chains like Heartland Dental (KKR-backed).
Closer to home, Crawfordsville Family Vet, formerly Crawfordsville Veterinary Clinic, joined Family Vet Group in 2020 and became part of Heartland Veterinary Partners—another private-equity-backed consolidator—in 2022.
When private equity and hedge funds buy local newspapers, they typically sell off real estate, slash newsroom staff and centralize operations, leaving “ghost papers” that cover little beyond wire copy and press releases. Studies have found that when local journalism shrinks or disappears, cities often face downgrades in their municipal bond ratings as lenders perceive more risk, and measurable increases in government waste and corruption–from higher borrowing costs to more fraud prosecutions—because there are fewer reporters watching city halls and county commissions. The cost of these deals, in other words, shows up in taxpayers’ interest payments and in the quiet contracts no one is around to scrutinize.
The only PE executive to talk to Greenwall was KKR’s Peter Stavros. He offered one value-added PE investment where his firm bought a Midwestern garage-door manufacturer. Afterwards, KKR gave workers ownership stakes based on their tenure. When KKR sold the company, truck drivers and line workers received substantial payouts. While this is one bright spot, Greenwall notes that it’s a represents a small fraction of the money and influence in an industry now deeply enmeshed in many industries.
If private equity is not in your life yet, it is likely coming—into preschools and nursing homes, toll roads and utilities, even emergency services. Greenwell ends with stories of resistance: the Wyoming town that built its own community-owned hospital, the Northern Virginia tenants who organized to confront their landlord, and the founding of MirrorIndy, a non-profit news organization in Indianapolis.
On a final note, Maryland has no PE-owned hospitals. The state regulates what hospitals can charge all insurers, public and private, leaving little room for the outsized margins that make private equity takeovers attractive. Policymakers in Maryland write rules that keep core public-service institutions aligned with community health rather than investor timelines, proving core quality of life industries–education, housing, healthcare– can be protected. Even Milton Friedman and other free market capitalists have advocated for such protections.