Buyout firms vs Hedge Funds

W

WallstYouth

Seems like these days you hear about buy out firms doing really well and hedge funds gaining more heat under the SEC radar. I never really understood why buy firms do so well, especially when most of the companies they pick up are companies already on the verge of bankruptcy or record losses, any care to explain how buy out firms are able to turn around companies in such a short time and recoup investments and profit?

Do most buy out firms just look for companies doing really bad in a really good sector and hire management consulting companies like McKinsey and KPMG in to turn things around? Then resell it to a competitor?
 
In a nutshell, the buy-out firms want to wipe out the debt and somehow hold onto the assets and start over with a clean slate. It's possible that assets may be undervalued. The buy-out firm hopes to sneak in and buy the assets cheaply before anyone else notices.
 
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