Maybe, but LBOs also offer a way for shareholders to exit. Unless you can sell to a strategic acquirer (which could also be PE, but usually not) there are not a

Maybe, but LBOs also offer a way for shareholders to exit. Unless you can sell to a strategic acquirer (which could also be PE, but usually not) there are not a lot of exit options. And who is going to acquire a business just with equity? People don't want to run businesses for ever. Private equity allows them to, in some cases. An unmotivated entrepreneur who is only doing a half assed job after a while will also cause a company to go bankrupt. Better to sell then. Banks generally have sufficient collateral (i.e. from the acquired business) to cover the outstanding principal in the event of a bankruptcy.