Private Equity Drives Over Half of Largest U.S. Bankruptcies in 2025

Why It Matters

The outsized role of private‑equity firms in the largest U.S. bankruptcies reshapes the competitive dynamics of the investment‑banking industry. Banks that traditionally sourced restructuring mandates now face a well‑capitalized, deal‑savvy PE cohort that can dictate terms and capture advisory fees. This shift forces banks to either deepen partnerships with private‑equity sponsors or develop differentiated expertise in alternative restructuring solutions. Beyond fee competition, the concentration of PE‑backed failures in manufacturing, healthcare and retail signals potential systemic risk in those sectors. A wave of consolidations or asset sales could alter market structures, affect credit availability, and influence the pipeline of new issuances. Investment banks that can anticipate these sectoral changes will be better positioned to advise on capital‑raising, refinancing, and strategic transactions.

Key Takeaways

• Private‑equity firms participated in 54% of U.S. bankruptcies with liabilities > $1 billion in 2025 (19 of 35 cases).
• PE involvement accounted for 51% of large bankruptcies > $500 million, despite representing ~7% of the economy.
• Out‑of‑court restructuring methods were used in 44% of PE‑linked cases.
• Approximately 65,850 jobs were lost across the PE‑associated bankruptcies.
• Manufacturing saw the highest concentration, with about 60% of its largest bankruptcies tied to private‑equity ownership.

Pulse Analysis

The data underscores a strategic evolution within private‑equity: firms are increasingly leveraging distressed assets as a growth engine rather than solely pursuing traditional buy‑and‑build models. By entering the bankruptcy arena, PE sponsors can acquire assets at deep discounts, restructure debt on their terms, and often emerge with controlling equity positions. This approach aligns with the broader trend of capital markets seeking yield in a low‑interest‑rate environment, where distressed opportunities present higher return potential.

For investment banks, the implication is twofold. First, the advisory landscape for large‑ticket restructurings is becoming more crowded, with PE firms often acting as both buyers and sellers. Banks must therefore differentiate themselves through specialized expertise, data analytics, and the ability to navigate complex creditor negotiations. Second, the concentration of PE activity in sectors like manufacturing could accelerate consolidation, creating a pipeline of secondary transactions—asset sales, carve‑outs, and roll‑up strategies—that banks can capture if they maintain strong relationships with both the PE sponsors and the remaining operating companies.

Regulatory scrutiny may intensify as policymakers assess whether the high concentration of PE in distressed deals contributes to systemic risk. Should new guidelines emerge—such as heightened disclosure requirements or limits on leverage in bankruptcy contexts—banks will need to adapt quickly. In the interim, firms that proactively align their restructuring teams with PE sponsors, while also offering alternative financing solutions to non‑PE clients, will likely secure a competitive edge in a market where distressed deal flow is set to remain a significant revenue source.