There really are great private equity firms turning around struggling companies and investing in young start-ups. They’re doing some genuine societal and economic good. Unfortunately, there’s also a subsector of the PE industry that specializes in effectively strip-mining companies and then dumping them into bankruptcy court. This partly explains why PE-owned companies are “about 10 times as likely to go bankrupt as non-PE-owned companies,” as the Enterprising Investor notes. And it largely explains what happened at Steward Healthcare, the local hospital chain driven into bankruptcy by its PE owner after it squeezed the real estate value out of Steward and left the rest of the system in financial shambles. Steward’s demise was ultimately tied to a deliberate ‘sales-leaseback’ strategy often used by PE companies.

Which raises the question: Are some PE firms, or divisions within PE firms, basically the modern business equivalent of plundering pirates? I’d argue ‘yes’  — and that the plundering needs to be banned as it applies to former non-profit entities (like hospitals) that PE firms buy. Brendan Ballou, a former federal prosecutor and special counsel for private equity at the US Department of Justice, has a more nuanced answer in a Q&A at EI, but he makes clear he’s no fan of various PE strategies.

Btw: The American Prospect has a story on how PE firms are “maneuvering to invest in college athletes, their schools, and the conferences they play in.” They’re going after another non-profit sector. What could possibly go wrong?