Part 7/17:
Typically, private equity acquisitions are financed with 60-75% debt—far above the 30% seen in public companies. When the economy is stable and interest rates are low, this leverage magnifies returns. But as interest rates have risen sharply in recent years, the sustainability of such high debt levels—between six to eight times earnings—becomes questionable. The increased financial burden heightens bankruptcy risk, exposing vulnerabilities in an industry that relies heavily on borrowed money.