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Private equity has received much of the blame for the demise of prominent retailers. However, the reality is that companies declare bankruptcy because they fail to adapt their business models to face the challenges from more technologically-savvy companies like Amazon.
Says Jonathan Bender in an article on Law360, "It's important to recognize that private equity professionals put real money at risk when they invest in these retailers, and while fees associated with PE deals are certainly part of the equation, the intent from PE fund managers is not to suck a portfolio company dry by extracting fees. They're investing their clients' money and looking to turn these companies around and get a return on their investment. They are not making it on the management fees. That's not what they're getting rich on. If all they pull out is a management fee, that's not going to make their investors happy."
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