That kind of value extraction can be very good for investors, so they give PE firms lots of money to deploy, and the PE firms then throw that money at the business owners who find it hard to resist. I suspect that's how.
However:
> Is private equity simply the scavenger, feeding off the walking-corpses of these businesses, encouraging new growth?
I think there is a lot of truth to this. The kind of business that is susceptible to this kind of pillaging tends not to be one with a promising future. A healthy company tends to trade at a healthy premium to its net asset value (reflecting expected future growth) so it makes less sense for someone to buy up the company just to extract the assets. I suspect in many cases the alternative to a PE takeover would be consolidation or just plain old bankruptcy.
There is a separate, but arguably related, problem of PE extracting consumer surplus, ie, buying a company and putting the squeeze on customers (charging more for shittier products) in order to increase profits. But that is far from a PE-specific problem, as can be seen from the many cases of enshittification in public companies.
The other point is that we only hear about PE deals that "go bad" (either for the investors or the company) because that's the juicier story. PE firms are buying up lots of companies all the time, but "PE deal goes okay" is not a good headline. There are probably a lot of brands out there that you don't even know are owned by PE. Contrary to popular believe PE isn't just about stripping the meat from dead or dying companies, though it is a common strategy (and one that is arguably more prevalent in certain parts of the economic cycle).
However:
> Is private equity simply the scavenger, feeding off the walking-corpses of these businesses, encouraging new growth?
I think there is a lot of truth to this. The kind of business that is susceptible to this kind of pillaging tends not to be one with a promising future. A healthy company tends to trade at a healthy premium to its net asset value (reflecting expected future growth) so it makes less sense for someone to buy up the company just to extract the assets. I suspect in many cases the alternative to a PE takeover would be consolidation or just plain old bankruptcy.
There is a separate, but arguably related, problem of PE extracting consumer surplus, ie, buying a company and putting the squeeze on customers (charging more for shittier products) in order to increase profits. But that is far from a PE-specific problem, as can be seen from the many cases of enshittification in public companies.
The other point is that we only hear about PE deals that "go bad" (either for the investors or the company) because that's the juicier story. PE firms are buying up lots of companies all the time, but "PE deal goes okay" is not a good headline. There are probably a lot of brands out there that you don't even know are owned by PE. Contrary to popular believe PE isn't just about stripping the meat from dead or dying companies, though it is a common strategy (and one that is arguably more prevalent in certain parts of the economic cycle).