If the acquired company runs into financial trouble, its owners need not bail it out. Even in bankruptcy, when a company declares in court that it cannot pay all of its creditors, the private equity firm that owns it—a firm worth orders of magnitude more than the company itself—won’t step in to cover the costs. As secured creditors, banks are the first to be paid back with the money that remains after a bankruptcy, so the threat to them is low too. The company and its employees shoulder the risk.
