Comment by willio58

It would be functionally the same as what you described if the parent company took on the debt, but that’s not how they do it. They make the purchased entity take on the debt. Hence why you often see mass layoffs in the company that was acquired soon after the deed was done. The company has so much debt it can barely function and the easiest way to pay some back is redirecting salaries at it.

Then once you realize why private equity firms do this, how their leaders have extreme monetary incentives to squeeze value out of companies in ways not limited to this, you realize why it’s insane how we have basically zero regulation on it.