Private equity behind 60% of manufacturing bankruptcies in Q3

Since 2024, PESP has tracked and analyzed corporate bankruptcies, identifying the disproportionate role that private equity-owned firms have played in bankruptcy filings. This trend continued into the third quarter of 2026. Although private equity-backed firms make up only about 7% of the US economy, private equity backed firms made up 33% of the largest corporate bankruptcies with over $1 billion in liabilities (3 of 9), 36% of large bankruptcies with liabilities over $500 million (5 of 14), and 20% of all corporate bankruptcies with over $10 million in liabilities (16 of 29). 

Private equity backed companies made up 60% of bankruptcies with over $10 million in liabilities in the manufacturing sector in Q3 2026 (6 out of 10). For more information on private equity buyouts in the manufacturing sector, see PESP’s September 2026 report. 

Private equity managers generally prefer short-term profits and rapid value extraction over the long-term stability of the companies in their portfolios. Private equity managers finance the acquisition of companies using debt secured by the companies they are acquiring rather than taking on the debt themselves. This saddles private equity-owned companies with substantial debt, often draining resources that could otherwise be invested in innovation, workforce development, or adapting to market changes. Instead, companies under private equity ownership must channel much of their revenue toward servicing this debt, leaving them more vulnerable to financial distress and bankruptcy.

Private equity’s expansion into nearly every sector of the U.S. economy has far-reaching consequences. The heightened risk of bankruptcy threatens job security for workers, disrupts services for consumers, and creates ripple effects across local economies. Understanding private equity’s growth and strategies remains crucial for policymakers, industry stakeholders, and the public as they grapple with an increasingly privatized landscape.

A few examples of Q3 2026 bankruptcies in the manufacturing sector serve as examples of the connection between private equity financial strategies and the disproportionate role they play in US bankruptcies:

Manufacturing

The manufacturing sector is key to the United States economy, accounting for nearly 10 percent of the country’s gross domestic product. The sector employed approximately 15 million workers in 2024, representing nine percent of total US employment. In the first half of 2026, manufacturing accounted for more than 20 percent of private equity acquisitions of companies with more than 500 employees. 

Private equity ownership in manufacturing has led to increased market consolidation, layoffs, bankruptcies, union-busting, health and safety risks to workers and communities. 

For more information on private equity buyouts in the manufacturing sector, see PESP’s September 2026 report. 

Bankruptcies in quarter three of 2026 highlight the growing trend of private equity buyouts and consolidation through debt-funded roll ups in the manufacturing sector, which claim to build efficiencies through scale, but can often create long term problems when economic trends shift in an age of rising interest rates. 

Alkegen

Alkegen is a manufacturer of products that go into the supply chains of many global technology companies. The company has a long history of private equity ownership, changing hands between five private equity firms in just over three decades, most recently acquired by Clearlake Capital Group in 2018. Throughout the long history of private equity ownership, it has used high debtlevels to fund acquisitions of many global companies. The multiple private equity owners added large amounts of debt over the years to fund these acquisitions, as well as numerous dividend recapitalizations, where debt was used to pay out investors. 

Clearlake Capital acquired the firm in 2018 from private equity firm American Securities and immediately laid off 10% of the local workforce in Tonawanda, NY. Under Clearlake Capital, the company then began acquiring at least three manufacturing companies, funded by billions of dollars in debt hoisted on the company. By 2023, the firm grew to “75 manufacturing facilities operating in 12 countries and employs 9,000+ employees globally” and sold off its Thermal Acoustical Solutions business unit with five facilities across North Carolina, France, Germany, and China. 

By 2024, the company started to signal financial distress reaching an agreement with creditors and FitchRatings downgraded the company’s credit rating due to high debt levels, $1bn of outstanding term loan debt due in December 2025, and ongoing weak performance. In Q3 2026, the company filed for Chapter 11 Bankruptcy proceedings and eliminated over $3 billion in debt. 

Southern Motion, Inc.

Southern Motion is a furniture manufacturer that was acquired by private equity firm Gaineline Capital Partners in 2017, which subsequently acquired Fusion Furniture less than a year later, creating a company with over 2,000 employees. In 2018, Gaineline used a common private equity tactic called a “sale-leaseback,” where the portfolio company sells the real estate, in this case the manufacturing facilities, and then rents them back, adding the proceeds to the company’s short term income and adding a new long-term liability to the company’s books in the form of rent. 

By 2022, the combined company claimed it faced a slowdown in demand and laid off 15% of its workforce across two plants, without notice. “When we completed our work yesterday, the supervisor brought us to end of line and called the names of those who were laid off,” said Zack McMillen, who worked there for four years before the layoff. 

In 2025, Gaineline sold Southern Motion to Man Wah Holdings, but decisions made under Gaineline Capital Partners contributed to the company filing for Chapter 11 bankruptcy. The new owners loaned Southern Motion the funds used to repay in full its secured debt obligations, which exceeded $26 million. However, the rent obligations continued and the company claimed it had recorded operating losses every year since 2020. 

According to Furniture Today, “the landlord claimed more than $6.2 million was owed. Eviction judgments were subsequently entered, and Southern Motion faced an Aug. 31 deadline to vacate the facilities. Southern Motion filed for Chapter 11 on Aug. 31. The timing is difficult to ignore. Chapter 11 gives the company protection from immediate eviction and time to negotiate a new arrangement.”

Flex Pack

Flex Pack, a manufacturing company composed of multiple packaging materials companies including Phoenix Converting and Advanced Converting Works, was acquired by JZ Partners and Edgewater Services in 2018, operating under a variety of names until the company rebranded in 2024. Within four years of private equity ownership, the company acquired seven additional companies, combining to form what is now Flex Pack. 

To fuel these acquisitions, in December 2020 the company obtained a loan in the amount of $34.4 million. At the time of the bankruptcy almost six years later, the lender alleged that approximately $34.3 million in principal was outstanding.

It appears that the changes in consumer behavior post-pandemic altered the company’s expectations and as interest rates rose, it was not able to keep up with payments on the high debt it had accrued. The company filed for Chapter 11 bankruptcy proceedings in July 2026 with liabilities about five times as large as its assets, stiffing creditors and putting at risk the jobs of about 200 employees and contractors. 

Methodology

PESP reviewed all Q3 2026 bankruptcies fromPacerMonitorwith liabilities over $10 million, removed duplicates from the same entity or subsidiaries, as well as single asset real estate bankruptcies, and identified bankruptcies filed by companies that were majority owned by a private equity firm within five years of the bankruptcy.