This article was first published by the Halifax Examiner.

It’s March 19, 2025, and The Bay in the large mall in Dartmouth, Nova Scotia, is busy, busier than it’s been in a long time, according to staff members, because – belatedly, they say – people are showing up to support the department store now that they’ve heard it is in deep trouble and may have to close its stores across Canada.

But inside The Bay store, long-time employees continue to provide their usual impeccable service, despite the possibility that they may soon be out of a job.

They tell reporter Jennifer Henderson that they have no inside information about the fate of The Hudson’s Bay company, and know only what they’ve read in the news. They asked Henderson not to name them for fear of losing their jobs prematurely. All have worked at The Bay for a long time, one of them for 35 years. They have no idea if the Dartmouth store has a chance of staying open, or if they will get any benefits if it doesn’t.

On March 7, 2025, the Hudson’s Bay Company, the iconic Canadian retailer that can trace its roots (albeit shameful colonial ones) back to 1670, filed for creditor protection in the Ontario Supreme Court under the Companies’ Creditors Arrangement Act (CCAA). It owes creditors nearly $1 billion.

The Bay is facing possible liquidation, depending on the outcome of that creditor protection case, which in turn depends on whether a buyer or interim financing can be found.

So for now, employees just do their work, wait and see.

Only one of the employees Henderson spoke with knows who owns The Bay. She’s worked for the company for more than 15 years, and taken an interest in the corporate history. But that doesn’t mean she knows if or how the ownership is linked to the trouble that has sunk the company.

Digging for the root causes of failure

It’s not easy to find the root causes of what led to the sorry fate of The Bay. Most media reports focus on issues like “subdued consumer spending, Canada-U.S. trade tensions and post-pandemic drops in downtown store traffic,” and the state of the stores themselves, which these days tend to have broken escalators.

The Canadian Press has reported fairly regularly on The Bay’s creditor protection case, noting that 9,000 jobs will be lost if the company liquidates its 80 stores across the country. But this kind of reporting would have us believe this is more a problem of upkeep than ownership.

This article, for example, talks about the “empty shelves and idle escalators,” as if perhaps management just didn’t know how to run a department store.

Most media coverage suggests that the earlier demise of big department stores like Eatons and Sears, and now possibly The Bay, is because they just failed to “change with the times.”

Rarely do the media mention the fact – a key and salient one – that the Hudson’s Bay Company is owned by U.S. private equity firm NRDC Equity Partners.

The National Post does name the owner, but doesn’t delve into the corporate record of the owner, or the problems inherent in private equity ownership.

There is no doubt that running a brick-and-mortar department store in 2025 is not nearly as straightforward as it once was. But that is just part of a bigger story.

That bigger story is private equity – how it works and how it is shaping, and often harming, the business landscape in Canada and beyond.

Behind the privacy curtain

Unlike most Canadian media, the prominent U.S. business publication Forbes sheds some important light on The Bay’s owner, American real estate mogul Richard Baker and his private equity firm.

Forbes quotes from a 2023 interview with Baker, who says, “Our largest business is our real estate business. Everyone seems to have forgotten that I was a real estate guy, still am, and that HBC is primarily a real estate company.”

Forbes connects dots between the sad fate of The Bay after its acquisition in 2008 by Baker’s investment firm, with a lot of convoluted corporate mergers and shapeshifting, until Baker took The Bay private in 2020.

That’s the thing about “private” equity firms. They are private, so if they acquire companies and then sell off their assets like valuable real estate, or shove massive amounts of debt on them, it is extremely difficult for the public to find all the gory details of the corporate blood-letting. They tend to refer to themselves not as private equity firms, preferring the more benign euphemism, “alternative asset managers.”

In his article, “Requiem for the Hudson Bay Company,” Mark Cohen, business professor and former Chairman/CEO of Sears Canada Inc, offers a brutal assessment of Baker and the way his private equity firm operates:

Question: What do Eddie Lampert and Richard Baker have in common? Answer: They have, are currently, or soon will be destroying everything they have had control over. Lampert singlehandedly killed nearly $50 billion in retail volume at Sears Roebuck, Kmart and Sears Canada. Now here comes Richard Baker. As you may have read, Baker has just sent Canada’s oldest corporation, The Hudson Bay Company [HBC], into bankruptcy.

Cohen continues:

Over the years following his improbable purchase of HBC Corp. from the widow of its previous owner, Baker hollowed out and eventually closed all of Hudson Bay Company’s divisions and operating strategies in Canada other than The Bay … Then he came up with a completely specious strategy to separate The Bay Stores from thebay.com … And now he has driven a set of coffin nails into The Bay itself.

Private equity is all around us

The Hudson’s Bay Company is just one of the many familiar businesses Canadians frequent every day that is owned by large private equity firms, most of which attract only very wealthy investors, including large pensions funds.

Unless you live in a rural, out-of-the-way part of Canada, you’ll not be able to travel more than a few kilometres – even a few hundred metres – without bumping up against an establishment owned by a giant private equity firm.

Looking for a second-hand bargain at Value Village? It is mostly owned by the private equity firm, Ares Management Corporation, with its headquarters in Los Angeles, U.S.

Stopping in to Staples for some stationery, or Rona for some hardware for your home? Both are owned by the private equity firm, Sycamore Partners, headquartered in New York.

Rushing an ailing pet to the Maritime Veterinary emergency centre at the large mall in Dartmouth? That clinic is owned by NVA Canada, which in turn is held by private equity firm JAB Holdings, with its headquarters in Luxembourg.

Booking a flight with WestJet? That airline is owned by the Toronto-based private equity firm, Onex, where former Canadian prime minister Stephen Harper’s right-hand man, Nigel Wright, is a managing director.

Heading to a Rexall pharmacy, or contacting Well.ca for some health products? Since the end of last year, Rexall pharmacies and Well.ca have been owned by Canadian private equity firm, Birch Hill. That means 385 pharmacies in Canada, employing 8,000 people, are now controlled by a private equity firm, with all the secrecy that affords the profit-seeking owner and investors.

Looking for some camping supplies at Mountain Equipment Company (MEC)? In 2020, the British Columbia Supreme Court allowed the iconic Canadian Co-op to be handed off to Kingswood Capital Management, a Los Angeles-based private equity firm that renamed its acquisition MEC, with the “c” now standing for “company” rather than “co-op.”

Five years later, MEC is once again for sale, and its buyer will once again probably be a private equity firm.

The private equity playbook

But what does this all mean? And should Canadians be concerned about the prevalence of private equity ownership, and their “leveraged” buyouts of familiar Canadian businesses?

If you ask Rachel Wasserman – and I did – the answer is a resounding, “Yes, it’s a big problem.”

Wasserman is a corporate and commercial lawyer, with experience at two of Canada’s most prestigious law firms. Today, she is a fellow with the Canadian Anti-Monopoly Project (CAMP), a non-profit that “produces research and advocates for policy to make Canada’s economy more fair, free, and democratic.”

In a telephone interview, Wasserman said that when private equity firms do a leveraged buyout, the loan they used to buy a company winds up on that company’s books, reducing the company’s ability to run its business, while lining the pockets of the shareholders of the private equity firm.

Wasserman recently authored a report on the “private equity playbook” for CAMP, and “how these buyout firms extract rather than build value.”

That report begins by laying out the issue:

In recent years, countless headlines have been dedicated to the topic of the growing presence of private equity in our economy. From industries as diverse as veterinarians, fast food and the makers of aircraft landing gear, private equity firms are increasingly taking stakes in industries that were traditionally the domain of small and / or medium-sized businesses. This shift represents a transformation away from an economy where it was common for private companies to be controlled by their founders coming from a variety of backgrounds, including engineering, science, sales or manufacturing, to one where the leaders of businesses are increasingly concentrated in finance, the industry of making money for other people.

The report goes on to explain the basics of private equity, which is “essentially a pool of money collected from investors (a fund) and used to purchase companies.” It points out that private equity investments in young companies contribute to growth and innovation.

The same can’t be said for buyout private equity that invests in mature companies.

“It is here, when private equity pivots from growing to extracting, wherein the problem lies,” the report explains. “Unlike their growth-focused counterparts, these buyout private equity firms, accounting for more than half of the entire private equity industry, more so focus on cutting expenses and extracting cash.”

Wasserman’s report summarizes the buyout private equity playbook:

The tried-and-true strategy is to saddle a company with high levels of debt, hollowing out operations and then offloading the company at the end of the investment period. There are few benefits and many potential consequences to this approach: enriched investors with hollowed out or bankrupted companies, unpaid suppliers, layoffs and overworked employees.

Another common private equity play, says the report, is a “sale-leaseback” arrangement. This means the private equity firm will sell off a company’s valuable real estate to a third party, and then lease those properties back to the company, which is burdened with this new rental expense.

“This results in a one-time windfall sent back to the private equity firm and its investors for a long-term ongoing rent expense for the assets a company used to own,” reads the report.

Private equity ‘roll-ups’ of entire sectors

Wasserman’s report states that private equity firms are “also a key driver of the consolidation of Canada’s economy.”

“While mergers like Rogers-Shaw in telecommunications and RBC-HSBC in banking garner headlines, the roll-up of once-independent and fragmented markets is going out of sight of Canadians and their regulators. With competition eliminated, private equity firms are free to raise prices and lower service quality to increase their returns at the expense of Canadians,” states the report.

As CBC reported recently, the increasing corporatization and centralized control of vet clinics is driving up prices. VetStrategy, for example, boasts that it owns hundreds of vet practices across Canada, and at least 20 of these are in Nova Scotia. In 2021, VetStrategy merged with global vet care firm IVC Evidensia, backed by private equity.

In addition to some of the big retailers that are owned by private equity, including the Hudson’s Bay Company that is now under creditor protection, Wasserman said a lot of dental firms are being acquired, as are long-term care facilities and child care, and even funeral homes. She said it would be very useful if someone completed a chart showing how many companies in Canada are owned by a handful of private equity firms – and there are a great many.

Wasserman thinks there should be consumer protection regulations that would compel the actual owners of these companies to divulge them to users, so if a dentist sells to a private equity company, they should have to notify all their patients of the new owner.

Private equity companies tend not to advertise to the general public their acquisition of a company or a chain of companies, and often retain original names. This means clients or consumers are rarely aware of the change.

When many independent businesses in one sector are scooped up by a private equity firm in a “roll-up,” Wasserman points out that they fall under the radar of Canada’s Competition Bureau, because it only looks at mergers involving large companies.

“The Competition Bureau definitely needs oversight on roll-up transactions,” Wasserman said.

Connecting dots not easy

For all their power and prominence in the financial landscape, many people have not heard of these private equity behemoths, and even fewer people really understand how they work. As Wasserman said, it is not easy to connect all the dots, because private equity is so opaque.

Wasserman said the biggest private equity firm is Blackstone, and other behemoths are Carlyle, KKR, and Apollo, all U.S.-based. She said some prominent Canadian private equity firms are Brookfield, which is now moving to the United States, Birch Hill, Fortwest, and Onex.

Canada’s current Prime Minister Mark Carney was chair at Brookfield before he resigned in 2025 to run for the Liberal leadership.

Wasserman noted that private equity has been acquiring and consolidating control of media in both Canada and the United States. And this, she said, creates “a chicken and egg situation in that private equity is buying up so much media that media can’t talk about it.”

‘Asshole capitalism’

However, in the past two years, private equity has been attracting a little more media attention. That’s in part because of the publication in 2023 of two high-profile books. Both paint a very damning picture of the way buyout private equity destroys healthy businesses and makes a very few rich people, far, far richer.

Obscenely so.

One of those books is the Wall Street Journal bestseller, “These are the plunderers: how private equity runs – and wrecks – America,” by Gretchen Morgenson and Joshua Rosner. The book sheds light on a “very small cohort of elite financiers” – or “privateers” – who have, over the past 30 years, used “excessive debt and dubious practices to undermine our nation’s [the U.S.] economy” while “being lauded for their financial prowess.” The authors refer to these people as “private equity’s Dr. Frankensteins.”

Morgenson and Rosner write that this small group of “Wall Street financiers, corporatists, and money-spinners” have “impoverished millions while enriching themselves.” They elaborate:

Private equity is a catch-all phrase, but the financiers we are highlighting take over companies in transactions using high-cost borrowed money raised in the corporate bond markets from investors willing to take on greater risks. They are not entrepreneurs or traditional businesspeople, prospering while creating jobs and opportunities for others. Theirs is a distorted kind of capitalism, a setup in which they benefit while many others lose. They have perfected the art of “Asshole Capitalism,” a term of art devised by Aaron James, a philosophy professor at the University of California, Irvine. It is a system where “citizens feel entitled to unlimited enrichment even at social cost.”

Morgenson and Rosner say the wealthiest private equity founders, Steve Schwarzman (Blackstone CEO) and Leon Black (former CEO Apollo), are “America’s modern-age robber barons.”

But unlike many of their predecessors in the nineteenth century, who amassed stupefying riches by extracting a young nation’s natural resources, today’s barons mine their wealth from the poor and the middle class through complex financial dealings. Their business model creates little of value for society; in fact, their job cuts, higher costs of goods and services, and exploitation of the tax code have worn the nation’s social fabric thin.

Morgenson and Rosner continue their scathing description of these plunderers:

Modern privateers, known as the private equity industry, plunder without physical violence, commandeering businesses armed with spreadsheets, debt financing, and high-priced lawyers. They operate (mostly) within the letter of the law, some of which they have helped to craft. The loot these latter-day pirates carry off is infinitely richer, and the havoc their pillaging visits on their victims and on society is widespread and profound.

A look at the biggest players

Morgenson and Rosner zero in on some of the largest private equity firms, and their owners who have grown immensely wealthy from leveraged buyouts – Apollo, Blackstone, Carlyle Group and Kohlberg Kravis Roberts (KKR).

All four have major Canadian investments.

Apollo, headquartered in New York, owns the Great Canadian Gaming Corporation, now Great Canadian Entertainment, which owns gaming and entertainment facilities across the country, including Casino Nova Scotia in Halifax and Sydney.

Blackstone, also headquartered in New York, is the world’s largest private equity firm managing assets worth $1 trillion. It is a giant presence in Canadian real estate with about 450 properties worth $14 billion.

Morgenson and Rosner also write about KKR, another New York-headquartered private equity giant, which led Toys “R” Us and successful U.S. luggage maker Samsonite into bankruptcy. The authors examine the environmental racism, climate and environmental problems with KKR’s investments in fossil fuel infrastructure. That includes the controversial Coastal Gaslink pipeline in Wet’suwet’en territory in British Columbia, which KKR owns.

The ‘plan to pillage‘

The second 2023 book exposing the industry as the hugely destructive force it is? Brendan Ballou’s “Plunder: Private equity’s plan to pillage America.”

Ballou is a federal prosecutor in the U.S, who prosecuted the Jan. 6, 2020 Capitol rioters, and said he had to resign after President Donald Trump pardoned the 1,500 rioters the first day of his second term in January 2025. Ballou has also served as Special Counsel for Private Equity at the U.S. Department of Justice and in the anti-trust division of that department. There he handled white-collar crime and companies harming competition.

In an interview from California, Ballou said that his concerns about private equity grew in 2020 during the pandemic, when he noticed the “huge number of companies that were getting bought up by these firms he had never heard of, like Blackstone, Carlyle and KKR.”

That started him researching the firms and the effect they were having on the economy. “That’s what sent me down the rabbit hole of what ultimately became the book,” Ballou said.

This is how Ballou sums up the private equity model:

Private equity firms invest a little of their own money, a lot of investors’ money, and a whole lot of borrowed money to buy up companies (typically making them the sole, or private owner, hence the name). They then use various tactics to extract money from those companies, with an eye toward reselling them for a profit a few years later. Some of the companies that private equity firms buy go on to great success. But many others collapse or limp along, gutted of the assets that made them worth buying in the first place.

“This leads to a practice of extraction, rather than investment, of destruction, rather than creation,” Ballou said.

Pension funds undermining pension plans

What is perhaps most ironic is that those who have the most to lose from private equity are enabling it, according to Ballou. He explained:

Pension funds – the investments of unions and middle-class workers – are some of private equity’s largest investors. Private equity firms then use money of these funds to buy companies in which they often cut wages and abandon pension obligations. Extraordinarily, we seem to be creating the tools of our own destruction.

As Wasserman’s report notes, “Canadian pension funds are some of the largest private equity investors, with the Canadian Pension Plan, being one of the largest private equity investors in the world.”

‘Using someone else’s credit card to pay yourself’

Ballou listed several U.S. companies, many familiar to Canadians, which have gone bankrupt after private equity firms bought them, including: Toys “R” Us, Sears, American Apparel, Claire’s, Hertz, Linens ‘n Things, Nine West, Payless ShoeSource, and RadioShack.

Ballou said these bankruptcies “are the consequence of private equity’s business model,” which involves loading their acquired companies with debt and also imposing punishing fees on them, “for the privilege of being owned by them.”

This results in massive wealth transfer upwards, he said. “The co-founders of KKR, Apollo, and Blackstone are worth [US]$7 billion, $9 billion, and $29 billion, respectively,” Ballou said.

Private equity firms “take companies’ borrowed money and give it to themselves,” according to Ballou. “It’s like using someone else’s credit card to pay yourself.”

Ballou said that in 2020 in the United States, private equity firms spent about a trillion (U.S.) dollars buying up companies, and the entire U.S. GDP is $25 trillion.

“The private equity industry is perhaps the most effective lobbying force in the United States,” he said, noting that an “astounding number” of extremely high-level government officials and politicians move into private equity after leaving public service.

Ballou noted that Stephen Schwarzman, the co-founder of Blackstone, was a strong supporter of Trump, and served as an informal ambassador to China in negotiations during Trump’s first term as president.

Private equity firms understand the complexities of the legal system and use that to their advantage, and they benefit from very favourable tax loopholes, Ballou said.

“We lawyers have this ability to invent a bad business model every 20 years or so,” Ballou said.

Still, he tries to be optimistic.

“Private equity is part of the larger financialization of our economy, and it is perhaps the worst exemple,” he writes. “But if we created private equity, we can also contain it.”

How to change course

Rachel Wasserman’s report on private equity for the Canadian Anti-Monopoly Project offers six ways to limit the negative consequences of buyout private equity in Canada. Summarized, these are:

• disclosure requirements should include audited financial statements to allow better monitoring of these firms
• private equity firms should have to guarantee financial obligations of the companies in their portfolios to limit their ability to exploit bankruptcy laws
• the Competition Bureau should have oversight on roll-ups
• private equity firms should have to report to regulators before saddling companies with debts, while transferring wealth to investors
• alternatives for entrepreneurs selling businesses could include Employee Ownership Trusts
• closing the carried interest loophole, which allows private equity firm partners to recognize their income as capital gains.

Wasserman tells the Examiner that without changes, Canada’s economy will continue to be “financialized,” meaning the purpose of business is not to produce something or provide a particular service, but to produce returns for investors.

“Trickle-down economics and financialization together do not create for happier communities, happier people,” Wasserman explained. “They create financial optimization, which treats people like robots.” And the externalities, she said, land on people and the environment, harming mental health, physical health, the environment.

Without changes, Wasserman said, the future is bleak:

There are short-term consequences, and there are long-term consequences. As our economy consolidates and homogenizes … you’re going to see prices go up. You’re going to see quality go down. You’re going to see all the changes you would expect in a financialized economy. But the bigger picture is if businesses keep getting bought up, we will eventually run out of businesses to buy up. And that means entrepreneurship will cease to exist because you will just effectively have a capital class and a working class.

No miracle for The Bay in Dartmouth

Back at The Bay in Dartmouth, all of this, of course, is cold comfort for the loyal sales staff who have given so many years of their lives to the store and the company.

Still, they hope that even if The Bay has to liquidate some stores, the Dartmouth one will remain open.

One salesperson who has worked at The Bay for more than 30 years told the Examiner he’s still hoping for a miracle.

“I haven’t given up yet,” he said.

Everything depends on what happens in the Ontario Supreme Court.

Update: Several hours after this article was published in March 2025, Ontario Superior Court Judge Peter Osborne approved the liquidation of all but six of the 80 Hudson Bay stores. The Dartmouth store is one of the stores that has been closed, as is the landmark Granville Street store in Vancouver, BC.

With files from Jennifer Henderson

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