So whether it is a former startup that grows and eventually sells out to PE or a mainstream, old-line firm that gets bought out from a major stock exchange, PE moves in to take over. Private equity funds typically control management of the companies in which they invest. Often, PE brings in new management teams that focus on making the company more valuable. At least that is the idea.

Critics, of course, have a less charitable view, which can be boiled down to the accusation that PE takeovers are little more than “strip and flip” operations. That is, the new guys take over and promptly lay off lots of personnel (usually, goes the claim, they lay off the ones who know how to run the business). Then the new guys sell the good stuff, load the company up with debt, and bail out by selling the corporate carcass to gullible investors who are too dumb to know any better. There have been quite a few examples of this kind of relatively destructive PE management activity in the past few years (one fast-food chain that shall remain unnamed offers a Whopper of an example), but then again, one can cite publicly traded companies that have financially engineered themselves into the dirt as well (Sunbeam and the mercurial “Chain Saw” Al Dunlap come to mind). As is the case with many things in this world, however, the truth depends upon the situation. Nothing is all good or all bad.