So, some PEs do try to run businesses sustainably. But we mostly hear about the PEs that turn a business that's slowly dying to one that will operate "as normal" until it suddenly dies, usually somewhere around 5-7 years later.
The first thing is that, if at all possible, the PE wants to do a leveraged buyout where the acquired company itself has borrowed most of the funds to buy itself. This cashes out the previous investors, but leaves most of the risk with lenders rather than the PE firm. Sometimes the PE may get a cut of the financing revenue. Most of the loan will be sold on the bond market, typically as junk bonds. Junk bonds have high interest rates, because there's a good chance the loan won't be repaid, but maybe you'll collect enough between interest and the bankruptcy settlement.
While the company operates under the PE's management, it's getting paid management fees.
It's also likely to move valuable assets out of the company; for real estate, sale and leaseback is common; when the company implodes, the PE keeps the land and can sell or lease it to someone else. The sale price was probably under market and the lease over market, so the PE earns money here. Having a high lease payment helps the PE finance the purchase, and may help it finance similar property as well.
the PE wants to do a leveraged buyout where the acquired company itself has borrowed most of the funds to buy itself.
Planet Money did an excellent podcast back in 2012 about Bain Capital buying and effectively destroying an iconic American manufacturer of legal pads. It's a great example of exactly this behavior:
The interest rates are high, and the lenders likely will sell off the loans in a few years. If the company sticks around for a few years and looks ok, they might even be able to sell the loan for more than they lent out. Especially if the corporate numbers look good because of short-term changes, they may be able to get out.
When the company goes bankrupt, the lenders have first priority for remaining assets, sometimes lenders will takeover a business and run it away from the shore and earn a profit that way, too.
They got 13 years of payments which might have been enough to make it worth it for the lenders depending on the premium they were getting on loaning the money. Sears and Joann's also took about 13 years from buyout to bankruptcy. Party City only took 6 years.
The first thing is that, if at all possible, the PE wants to do a leveraged buyout where the acquired company itself has borrowed most of the funds to buy itself. This cashes out the previous investors, but leaves most of the risk with lenders rather than the PE firm. Sometimes the PE may get a cut of the financing revenue. Most of the loan will be sold on the bond market, typically as junk bonds. Junk bonds have high interest rates, because there's a good chance the loan won't be repaid, but maybe you'll collect enough between interest and the bankruptcy settlement.
While the company operates under the PE's management, it's getting paid management fees.
It's also likely to move valuable assets out of the company; for real estate, sale and leaseback is common; when the company implodes, the PE keeps the land and can sell or lease it to someone else. The sale price was probably under market and the lease over market, so the PE earns money here. Having a high lease payment helps the PE finance the purchase, and may help it finance similar property as well.