personally, I think PE works something like: it's easier to cut costs than create value, so they buy something, and cut costs like crazy. It'll work with almost

personally, I think PE works something like: it's easier to cut costs than create value, so they buy something, and cut costs like crazy. It'll work with almost anything with enough money coming in. But, I think they often cut deep enough to compromise the long term health of the company, like if you suddenly cut your food budget to almost zero by eating nothing but ramen. In the short term, it's a budget miracle. Keep it up, and you'll die from not getting the vitamins and minerals you need. Before the long term consequences are fully understood and come to pass, they sell they company back off. I'd agree with another comment here. It doesn't even take a declining company, just one small enough to purchase (realistically, you can't buy Apple, it's just too big) with a stable amount of cash coming in. Getting the cash coming in is hard, that takes creativity and creating value, so they need that part in the bag before purchasing the company. But if you have the cash coming in, any fool can just start cutting costs. The stable income also helps with leverage. You can use the company you're buying as security for a loan to by the same company based on the stable income. Ta-da! That's another reason they need companies with cash coming in, leverage so they can flip bigger companies. I'm convinced any idiot with a billion dollars laying around could do it.