That’s not how “private equity works”.
That’s how 1 small part of private equity, LBOs, work.
Private Equity encompasses a lot more than LBOs.
Secondly, if it’s so obvious that this is how LBOs always work, then why do the people giving out the loan agree to do so?
Like if you went to a bank and everyone in the world knows that your intention is to borrow money and then declare bankruptcy to avoid paying the bank back, they will not lend you money.
Why should that be any different for the larger companies? The reality is that entities lend them money because they largely succeed overall.
Next, your claim that LBOs buy healthy companies is almost certainly wrong. But even if that’s what they are doing, they are able to buy it because someone is selling it. IOW, because they are paying a premium on the current value placed on the company by others. So if they’re willing to pay a premium and still manage to flip it for more, isn’t that a sign of success? You took a business and increased its value dramatically. To the point where it pays for your many failures as well.
The problems with LBOs lie around the fact that the way they achieve a lot of their success is by making a lot of hard decisions that need to be made but the original ownership cannot. This might be the right thing to do to make the company more functional but it has a lot of side effects since it leads to significant and rapid job losses, etc. In a country where people are largely in debt, and rely on their company for almost everything including healthcare, this has serious knock on effects not just on the individual but their communities and then the entire country.
The solution isn’t to make companies less effective by making hiring and firing harder. The solution is to find solutions outside of this.
These could include universal income, better unemployment insurance, providing limited pauses on debt payments on losing a job, etc.
But it’s a lot easier to complain about evil PE firms instead so that’s what people do. Besides, talking about systems attracts fewer eyeballs than evil corporate overlords so that’s what we see.