They own the gym, the pet shop and maybe even your dentist’s office. They might be selling you electricity or operating the hotel in your town. No matter where you live, companies that are part of your daily life have likely been taken over by private equity firms. Once hidden in the shadows of global finance, the industry has quietly amassed a portfolio valued at more than $4 trillion, emerging as a stealth force shaping how capitalism plays out around the world. The billionaire owners of these firms say they’re making money by building healthier corporations, often rescuing them from the vagaries of poor management or likely failure. They shake things up by restructuring operations, repositioning products or reaching for new markets. But in the process, they can sometimes strip companies bare — closing stores and factories and firing workers, all while earning fees for themselves and big returns for their clients. To critics, private equity firms are “vampires” or “locusts,” loading companies up with debt, exploiting regulatory loopholes and exacerbating inequality.
Investors have poured money into private equity, with the likes of Blackstone Group and Apollo Global Management LLC each raising more than $20 billion in single funding rounds since 2017. The industry’s pile of so-called dry powder — committed, uninvested capital — reached a record $1.7 trillion. All that money has fueled expanding ambitions. After starting off with unloved units of large corporations, the firms are now taking over dental chains and amassing holdings of single-family homes. Household names such as J.Crew, Hilton and Dell have all received private equity backing, while the big U.S. funds have reached overseas to suck up real estate in Spain and brewers in Japan. Local private equity firms have also sprung up around the globe. The industry has presided over dramatic turnarounds as well as spectacular failures. The 2017 collapse of Toys “R” Us, one of the largest retail bankruptcies of all time, was blamed in part on the crushing debt load engineered by its trio of private equity owners. The loss of more than 30,000 jobs shined a light on the industry and helped to renew calls to rein it in. One target is the so-called carried interest benefit, which enables private equity firms to pay lower taxes by classifying their earnings as capital gains rather than ordinary income.
