File sharing made music companies distressed assets ripe for buyouts

Evidence

As discussed in chapter 2, private equity (PE) firms raise investment funds to purchase companies, using large, leveraged levels of debt, borrowed against the assets of the target company. After the company is acquired, it is restructured and financially engineered, then sold, hopefully at a profit. Private equity often seeks out “distressed assets”—companies that are facing financial or operational difficulty and are thus more susceptible to a leveraged buyout. Due to file sharing, a recession, changing consumer behavior, and other factors, many music companies fell on hard times in the early 2000s and were subsequently targeted by private equity. — Andrew deWaard, Derivative Media, 188

Categorization

• DEFINE: Defines the leveraged-buyout mechanism and the distressed-asset logic private equity applies, defining the instrument the reader wants to trace.
• QUESTION: This is the lever the reader wants to test: does PE acquisition of labels leave fingerprints on song/sitcom form, or stop at industry structure?