alt Hacker News> wild guess was the banks offload the eventual IPO onto investors and so make their money on the IPO fees and funneling their own clients the dead-man-walking shares
The banks get paid back their debt when the next PE fund buys the company or the company pays it off. Unless an IPO is being done to pay off debt, which it never is, the mechanism you describe doesn’t occur.
The list of companies imploded by LBO/PE is quite high though. Why do banks keep lining up to fund such deals? They must be making money somehow. These companies aren't worth much in liquidation. Are they able to extract enough value during the dead-man-walking period to make it worthwhile? Especially for retail or similar deals where the bank isn't going to foreclose on a bunch of real estate or assets worth selling.
I was not saying this is how they make money - I was saying I honestly don't know. If you do know please share. I would love to understand why the banks are so keen to fund what looks to my eyes like super shady vulture capitalism. We start with a profitable company and end with a smoking husk. The Wall Street guys are doing it to steal as much value as they can before it all blows up. Someone is eating the eventual loss. Who? Or are you saying the majority of these deals don't end up with the company being eviscerated?