“We’ve Been Sold a Story That Isn’t Remotely True”: How Private-Equity Billionaires Killed the American Dream

In the canon of spectacular resignations, Megan Greenwell’s is up there.

On her last day as editor in chief of the beloved sports blog Deadspin, Greenwell published a blistering essay on the site about her soon-to-be former bosses at the private-equity firm Great Hill Partners, which had acquired Deadspin and other former Gawker properties earlier in 2019. In the essay, Greenwell accused Great Hill of undermining Deadspin’s staff at every turn and seeking a “quick cash-out” on its investment.

And it wasn’t just happening at Deadspin, Greenwell explained: “A metastasizing swath of media is controlled by private-equity vultures and capricious billionaires and other people who genuinely believe that they are rich because they are smart and that they are smart because they are rich, and that anyone less rich is by definition less smart.”

She’d written the post mostly for her own catharsis, Greenwell told Vanity Fair. But the response to it stunned her, as more than 1,000 messages poured in, many of them from readers who shared their own stories of how the private-equity industry had, in various ways, upended their lives too.

“It made me obsessive about reading about this, because I wanted to understand what had happened to me and to my coworkers and to my friends, and I realized that the only way to do that was by treating this as a reporting project,” Greenwell said.

Nearly six years later, Greenwell has funneled what she learned into a new book, Bad Company: Private Equity and the Death of the American Dream. The book is a deeply human account of the ways in which the multitrillion-dollar private-equity industry affected four different people: a Toys“R”Us supervisor who was laid off alongside the company’s 33,000 employees after the company declared bankruptcy following a private-equity acquisition; a rural doctor who watched private-equity ownership strip his Wyoming hospital of crucial services; a local reporter who helped lead union negotiations as private-equity-owned Gannett gutted newsrooms across the country; and an affordable-housing organizer whose own family suffered under a private-equity-industry landlord.

The book follows how private-equity firms like KKR, Bain Capital, Apollo Global Management, and more saddle the companies they acquire with insurmountable debt, even as the firms themselves profit. It also explores how each character in the book is fighting back against this model.

While Bad Company articulates how the industry works, its greater goal is to illustrate how the decisions the industry makes in the pursuit of profit influence us all. Greenwell spoke to Vanity Fair about who gets rich in private-equity takeovers, who gets hurt, and why no one in Washington seems willing to do much about it.

This interview has been edited and condensed for clarity.

Vanity Fair: I was grateful to you for writing a book about finance that doesn’t read like a book about finance. It’s about four people before, during, and after private equity came into their lives. Why did you want to structure it that way?

Megan Greenwell: It was really important to show what came before private equity, because I think there’s an unfair line of critique that really blames them for everything. In the industries I focus on—retail, housing, health care, and local media—private equity didn’t create the problem. It’s important to draw that out and talk about the mistakes that those industry leaders made that ushered private equity in the door. On the other end, I felt like it was incredibly important to show efforts to build something new. I am not an activist. I did not want to write a prescriptive book, but I also didn’t want to write a book that was like: Man, this all sucks.

Why did you decide to ground it in the stories of these people?

I really love books that go deeply inside a company. When McKinsey Comes to Town was such a brilliant business book. It is also just so not the type of reporter I am. I am not, ultimately, that compelled in my own work by getting inside a glass skyscraper and showing how decisions are made. What is most compelling to me is the effect on real people. I thought that was the only way I could not only get readers compelled by this sometimes dull but important topic, but also excite myself about it.

In terms of potential characters, I would say I talked to over 150 people in these four industries. So I was incredibly picky, because I knew that if readers weren’t compelled by these people themselves, then they weren’t going to hang with the book.

The central tension of the book is about the disconnect between what serves private-equity firms and what serves the communities that surround the businesses they buy. I’d love you to spell out how that disconnect manifests.

Leveraged buyouts are a huge percentage of what private equity does. The basic way leveraged buyouts work is that the private-equity firm bundles together money from their outside investors—university endowments, pension funds, ultrawealthy individuals. But that only ends up making up a small minority of the total money they use to acquire a company. The rest of the money is bank loans, and those bank loans are assigned not to the private-equity firm that made the decision to borrow that money, but to the company that they are acquiring.

So if I make an offer for your company, and I’m borrowing money to buy it, I’m not responsible for paying that money back; only you are. You end up with this complete divorce of incentives, where what is good for the private-equity firm is not necessarily what’s good for the portfolio company.

In industries that are real estate heavy—hospitals, retail, newspapers—private-equity firms will sell off the real estate assets of those companies to pocket the proceeds themselves. Then the portfolio company has to pay rent on the same land that they may have owned for years or decades. Now you have a situation where the private-equity firm is doing great because they’re collecting their management fees, plus they got this tidy little profit from the real estate sale, but their portfolio company is buried under debt from the acquisition and also rent payments where they previously owned their land outright.

You see the two paths start to diverge. The private-equity company is winning, and the portfolio company is getting weaker and weaker and weaker. That was the thing that really broke my brain.

You rattle off all the private-equity-owned chains that went under during the 2010s: Claire’s, Payless, Kmart, and many more stores of my youth. You also write that most of the biggest retail bankruptcies between 2012 and 2019 were private-equity-owned companies, and there was huge growth in private-equity ownership of housing during this time. What made this growth possible during that period of the 2010s?

There was a lot of cheap money available. Zero percent interest rates were super compelling to everybody. Beyond that, the exact factors were a little different for each industry. In some cases, these were industries that were booming. The Affordable Care Act really helped draw private equity into health care, because there was a bigger guaranteed pool of money.

The opposite of health care might be retail, where, at the time, a lot of these retail deals were done. Everybody could see that retail was likely to be an industry with some serious struggles in the relatively near future. Toys“R”Us was purchased in 2005, and Amazon was already growing really, really fast. Walmart was already very dominant.

If you were to set out and write a book about another industry, say the tech industry, and its impact on the world, it would probably hyperfocus on tech billionaires like Mark Zuckerberg or Elon Musk. It seems to me that there are no analogous household names in the private-equity space. Why is that?

A lot of people know the names of big private-equity guys, but they could not tell you that they are big private-equity guys. If you look around New York City, so many institutions are named after them. Henry Kravis, for example, of KKR, has multiple things at Mount Sinai named after him. He’s on the board of multiple cultural institutions. That’s a name that you see in the world, but I think you could ask 100 random New Yorkers who Henry Kravis is, and even if they’d seen his name, 95 of them are not going to be able to tell you.

I think that’s very much by design. Private equity is an industry that wants to continue to operate in the shadows. In so many cases, there’s so many layers of shell companies that you actually can’t figure out which private-equity firm owns what. I think that’s worked to the private-equity world’s advantage in huge ways. There’s just a little less scrutiny on you.

There’s certainly a narrative that private equity exists to rescue distressed companies and maximize shareholder value, which then benefits the pensioners and universities whose money is invested in private-equity funds, so everyone wins. What does the research say about the reality of that promise?

The one stat that’s really lodged in my brain is that 20% of companies acquired by private equity enter bankruptcy proceedings within 10 years, compared to 2% of other types of other companies. There is this narrative that the private-equity industry is made up of, essentially, superheroes who can come in and save struggling companies, and the data just shows that it is the opposite.

If you ask private-equity people about this stat, they will say, “But we buy companies that are already struggling!” But they’re buying companies that are struggling while claiming that they are the people who can save the company. It doesn’t make sense that there would be such a vast difference between the number of companies that go out of business under any other kind of ownership versus what happens when, allegedly, the smartest people in the finance world take over. We’ve been sold a story that isn’t remotely true.

There’s a 2023 study you cite that found that in three years after a hospital’s private-equity acquisition, the rate of preventable medical issues increased significantly. What are some examples of that?

In Wyoming, after Apollo Global Management bought these two hospitals and combined them into one—which meant, realistically, stripping the vast majority of services from one in particular—all sorts of terrible things happened. People just could not get the services they needed in an emergency in their hometown anymore. I’m not talking about advanced, specialized care that was never available at a rural hospital. I’m talking, all of a sudden, they couldn’t deliver babies anymore.

One of the two hospitals also eliminated its mental health ward, which was the only mental health facility in the entire county. All of a sudden, mental health patients were now in the hospital with other kinds of patients. They did not have the staffing or the facilities they needed to correctly treat mental health patients while protecting everybody involved.

In November 2020, there was a psychiatric patient at the hospital who was just in a regular room with no security guards, and he ran into the room of an elderly woman who was also being treated in the hospital and began gouging out her eyes with his fingers, and nobody stopped him until he had fully removed one of her eyes. The woman died of these injuries in what was declared a homicide.

Everybody knows when you cut staffing and cut supplies and all of these things, there are going to be negative consequences. This was just the worst possible outcome.

You call private equity the “prom queen” of DC, because donors on both sides of the aisle are so heavily represented in the industry. Do you have any hope that reform is possible?

There have been a variety of proposals at the federal level to regulate private equity, and those have ranged from pretty minimally invasive to Senator Elizabeth Warren’s Stop Wall Street Looting Act, which she has proposed several times, which would functionally regulate the industry out of existence.

Thus far, none of those have made a ton of progress. Even things like closing the carried-interest loophole, which nobody in private equity wants, would not cripple their ability to do their jobs. Yet that has not passed, despite Barack Obama, Joe Biden, and Donald Trump, now twice, saying that loophole should be closed.

I don’t think there’s a lot of likelihood of serious regulation at the federal level anytime soon. That said, there is some interesting stuff happening on the state level in several places.

Massachusetts recently passed a bill increasing scrutiny of private-equity deals in health care, and Pennsylvania is now considering a very similar bill. Those two bills both grew directly out of catastrophic private-equity deals. In both Massachusetts and Pennsylvania, there have been recent collapses of health care companies that were owned by private equity. I think we will start to see more of that kind of progress, because I don’t think the number of catastrophes is likely to slow anytime soon.

Since you said you didn’t want to write this book about how everything sucks, what, if anything, is giving you a little bit of optimism?

I do not really have opinions on what is the best way to reform this system, but I think it’s pretty hard to look at the totality of the evidence and not conclude that the system is really broken. So to me, when people are doing something, it is a reason for some sort of optimism.

All four of the protagonists in my book are doing something. This is a huge problem, and it is necessarily going to require a multifaceted set of solutions. So fighting for legal changes is one. Lawsuits is a related but different one. Going head-to-head with the companies themselves is one. One of the protagonists in my book spent months going around to various pension fund board meetings, trying to convince them to seriously consider no longer investing in private-equity funds.

A lot of the work also has to be in reinventing industries. Private equity did not create the problems of any of these industries. Even regulating private equity out of existence would not suddenly turn those industries into healthy ones. The journalist character in my book spent basically her entire career working for Gannett, which was owned by a private-equity firm. And she made a pivot to go into nonprofit local news start-ups. A lot of the work that is most exciting to me is the people who are like, “Hey, how do we build something better?” It’s not all going to work, but without that kind of spirit of experimentation, nothing better is ever going to come.

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