The PE funds you describe are only a portion of the many PE strategies. Some take over well managed family owned companies where the family wants out; other acquire parts of larger groups that are being sold off because the current owner needs cash to invest somewhere else; in many cases PE funds come in to provide the cash needed for massive international expansion etc etc. The vulture/turnaround funds you describe certainly exist, and give the acquired company some hope of survival (usually, at least initially, with massive cost cutting). The fact that all these are leveraged investments (some less than others) means that a negative turn in the economy can have a massive negative impact in the ability of the company to cover their debt obligation, hence the bankruptcy.