Private equity sits on record backlog of unsold US portfolio companies

Warren bill would impose criminal penalties on healthcare PE executives

Private equity firms in the United States are sitting on a record number of unsold portfolio companies, with hundreds held for years longer than typical fund timelines, according to PitchBook data and the Private Equity Stakeholder Project.

Jim Baker, executive director of the Private Equity Stakeholder Project, said funds are sitting on a “record number of unsold companies, many of which they’ve been unable to sell … or at least unable to sell at the prices that they’re looking for.” PitchBook data cited by the watchdog shows more than 13,500 companies in private equity portfolios remained unsold, including 2,563 consumer-products and services companies and 1,536 healthcare companies. Hundreds of those investments have been held for years longer than funds typically keep them, Baker said.

The scale of the industry’s footprint gives those warning signs broader reach. Private equity firms and the companies they own employ more than 13 million people in the US, according to the Private Equity Stakeholder Project, spanning the pet retailer PetSmart, owned by BC Partners; the footwear brand Birkenstock, purchased by L Catterton in 2021; and the kitchenware maker Pyrex, owned by Centre Lane Partners. Roark Capital’s holdings include Dave’s Hot Chicken, Two Men and a Truck and School of Rock. PE investors have also bought thousands of healthcare facilities in recent years, including nonprofit hospice care, rural hospitals and small-town dental offices.

Recent failures have illustrated the strain. Retailers Saks and Eddie Bauer filed for bankruptcy, while Kmart, JoAnn Fabrics and the hospital chain Steward Health Care have already collapsed, costing thousands of jobs and leaving several communities without a local hospital. Audrey Stienon, industrial-policy program manager at the antimonopoly think tank Open Markets, said a growing concern is that “eventually, the companies that have accumulated this much debt are going to collapse.” Often, she said, PE-owned companies are “really, really important businesses” providing jobs or vital services, so when they fail, “either you need to bail them out, or you need to find some to save them, or else you’re just stuck with fewer options for consumers down the line.”

The industry’s defenders argue that deep-pocketed investors can ride out the downturn. “Private equity-backed businesses face the same higher interest rates and economic pressures as other companies, but they also have committed investment partners that can provide additional capital and keep investing through difficult periods,” Will Dunham, president and chief executive of the American Investment Council, an industry trade group, said in a statement. “Ultimately, private equity only succeeds when the businesses it invests in succeed over the long term.”

The mechanism underlying the model is leverage. Brad Lipton, director of corporate power and financial regulation at the Roosevelt Institute, compared PE deals to buying a home with a mortgage — except the company itself, not the buyer, is on the hook for payments, and the buyer plans to sell within years. “Interest rates being unexpectedly high may have complicated exit strategies,” Lipton said. Edith Hotchkiss, a finance professor at Boston College, said leverage is the strongest predictor of bankruptcy; PE-backed companies carry debt of about 50% of their enterprise value, recent studies show, though their default rates are no higher than those of other similarly levered firms.

Rosemary Batt, a Cornell University management and labor professor who studies the industry, said what has changed is the price of buying target companies, which has risen sharply as the number of PE funds has grown. Healthcare companies that once sold at roughly 11 times EBITDA now trade at 18 times or more, she said. Higher entry prices, combined with limited regulation of how PE firms treat their portfolios, are “putting even more pressure on PE firms to squeeze the juice out of their portfolio companies,” Batt said, “at a time when there’s almost no regulation governing how they do that.” Firms “can engage in financial engineering or just slash and burn on the operating side,” Batt added, “and it takes years for anyone to really see it.”

PE-backed companies accounted for the majority of large US corporate bankruptcies in 2025 and the first half of 2026, according to the Private Equity Stakeholder Project. More than 60% of large US manufacturing bankruptcies last year were PE-backed, Baker said, as were an outsized share of healthcare bankruptcies. Pablo Willis, a spokesman for Americans For Tax Fairness, warned that PE-owned rural hospitals and other healthcare-provider chains are “vulnerable” — particularly as the Trump administration’s cuts to Affordable Care Act tax credits and Medicaid “bite” — and that “there’s bound to be a very negative effect.”

The lack of public disclosure makes the situation difficult to assess in real time. Companies owned by PE generally do not report their debt levels or other financials unless they go public or issue bonds themselves. “By design, the industry takes place in the shadows,” Lipton said, “so everything has to begin with the thought that we don’t have a lot of clarity.” When PE-backed companies do collapse, “by definition there is not enough money to go around to pay” their debts, Lipton said, and “someone is going to lose out and all too often that can be workers” owed pensions.

Congressional scrutiny of the industry has grown across party lines, even before the current interest-rate strain. A June housing bill curbs PE investment in single-family homes. Warren, one of the industry’s most vocal critics in Washington, is leading a healthcare bill that would impose criminal penalties on “executives who loot health care entities like nursing homes and hospitals if that looting results in a patient’s death,” along with clawbacks of PE compensation. The “Let Kids Play” Act would ban PE from youth community sports, described in the bill as a “$40bn industry dominated by private equity, with the singular goal of extracting as much profit as possible from families.” The corporate law firm Holland & Knight warned this month that “for private equity, the question increasingly is not whether Congress will investigate private equity firms and their practices, but rather where the scrutiny will turn to next.”

November’s midterm elections, widely expected to deliver one or both chambers of Congress to Democrats, could reshape the federal landscape, while several states are pursuing their own rules. Batt said the “best opportunities right now are for local and state level initiatives,” because Congress, even with a Democratic shift, will be “very hard pressed to do much.”