Disastrous Buyout Exposes Fuzzy Math in Private Equity Deals (1)

A private equity firm with a deep Wall Street pedigree wanted to sell a company. An A-list roster of investment banks — Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. — helped advance the deal. Mere months after it closed, the company said a key earnings measure was a mirage.

It sounds like a nightmare conjured by one of the many financial sages who for years have warned that private companies are reporting highly engineered profits, known by the acronym Ebitda, as they seek to lock in frothy valuations.

But this is very much real — ...