ROLE OF PRIVATE EQUITY IN RESCUING DISTRESSED FIRMS – A SUCCESS OR A TRAP

Abstract

This study investigates the role of Private Equity (PE) firms in rescuing financially distressed companies, focusing on whether such interventions lead to corporate recovery or strategic entrapment. In light of rising global and Indian corporate distress, particularly following the COVID-19 pandemic and regulatory reforms like the Insolvency and Bankruptcy Code (IBC), this research examines the dynamics of PE involvement through detailed case analyses of Amtek Auto, Toys "R" Us, and V2 Retail. Using a qualitative case study methodology, the project explores instances where PE interventions led to both successes and failures. Amtek Auto and Toys "R" Us represent cases where PE-driven strategies failed to achieve sustainable recoveries, while V2 Retail demonstrates a relatively successful turnaround under PE ownership. The findings highlight that while PE capital injection and strategic reorientation can accelerate stabilization, long-term success depends heavily on operational execution, sectoral conditions, and alignment of stakeholder interests. The study concludes with recommendations for improved due diligence practices, longer investment horizons, and greater regulatory oversight to enhance PE outcomes in distressed scenarios.