Why Private Equity’s Business Model Is in Such a Funk: QuickTake

Private equity firms, once the rainmakers of Wall Street, have fallen on hard times. For decades, they raised bushels of cash, bought businesses, loaded them with debt, sold them at a profit and persuaded happy investors to do it all over again. PE, as the asset class is known, grew at breakneck speed, snapping up companies worldwide — from dry-cleaning businesses and pet care companies to private hospitals and school operators.

A combination of higher interest rates, inflation and macroeconomic uncertainty over the past two years abruptly ended the party. Debt, which fuels big buyouts, has gotten costlier, ...