# How Private Equity Killed Toys “R” Us - Commoncog Case Library

**URL:** https://forum.commoncog.com/t/how-private-equity-killed-toys-r-us-commoncog-case-library/1658
**Category:** Blog Comments
**Created:** [November 22, 2023, 4:09am UTC](https://forum.commoncog.com/t/how-private-equity-killed-toys-r-us-commoncog-case-library/1658 "2023-11-22T04:09:24Z")
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### Author: ![ajzitz](https://forum.commoncog.com/user_avatar/forum.commoncog.com/ajzitz/32/917_2.png) [@ajzitz](https://forum.commoncog.com/u/ajzitz)
#### Post date: [January 6, 2024, 2:18am UTC](https://forum.commoncog.com/t/how-private-equity-killed-toys-r-us-commoncog-case-library/1658/2 "2024-01-06T02:18:06Z")

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The marriage of the LBO financing structure combined with a business that needs to invest and innovate to survive in a rapidly changing market becomes a straight jacket that chokes off a businesses ability to change and be resilient and is a bad instance of capital expertise. The debt service costs combined with a preoccupation to return dividends to equity owners leads to short-term cost cutting decisions, fragilizes the business and rarely allows the business to survive. The post-LBO bankruptcies of Payless and Toys “R” Us are instantiations of this idea. Often, the success of this strcuture is oversold (hat tip: @cedric).

In contrast, this structure did work for Dell, but I think it was due to several factors: the FCF generations of PC business, the embedded assets of VM Ware that gave Dell / Silverlake latitude, and Michael Dell’s significant positions, attention, and credibility / reputation. What other successul LBOs have occurred? Why were they successful?

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