After more than eight decades in operation, craft retailer Joann is going out of business, closing all 800 of its stores and laying off 19,000 employees. The news comes after the retailers restructuring plans failed and a liquidator opted to purchase its assets. Joann is far from the only retailer in its death throes these days. Recent data shows that the number of retail-store closures is expected to double during 2025, to roughly 15,000 from the 7,300 or so in 2024.Accordingly, Joann is in a similar boat to companies such as Red Lobster, Big Lots, and Party City, which have each announced plans to either completely close up shop or enact big restructuring in recent months.And a commonality between many of them? Private equity firms are playing a large role.Private equity has been in the spotlight in recent years as it relates to many large-scale business restructurings and closings. For instance, restaurant chains Red Lobster and TGI Fridaysboth of which filed for bankruptcy last yearwere backed by private equity firms. Critics say that private equity, often simply referred to as PE, tends to come in and strip a company for parts and eventually kill it off rather than trying to make an honest attempt at turning the business around and making it profitable.While poor stewardship on the part of private equity can certainly contribute to a companys downfall, experts say what happened with Joann appears to be more nuanced.Private equity doesnt have a crystal ballJoanns situation is somewhat unusual as it relates to its current situation. Back when it was known as Jo-Ann Stores, the company was acquired by PE firm Leonard Green & Partners in 2011 for roughly $1.6 billion as part of a leveraged buyout, taking the company private. The deal effectively put Joann and its resources up as collateral, and after some rebranding and leadership changes, the retailer went public again in early 2021, during a stretch when it was getting a jolt from pandemic-era growth in crafting and other such at-home activities.But the past few years havent been so kind, and Joann again faltered. It found itself in the lurch with two bankruptcies over the past year as its leadership was unable to successfully capture the brief momentum it had experienced in 2020 and 2021.Its hard to ignore that Joann is a specialty retail company with a huge geographic footprint, large-format stores, and thousands of employees: exactly the kind of retailer that has found it increasingly difficult to thrive in the decades since e-commerce companies like Amazon have entered the fray.So while Joann did have PE backing, prevailing market conditions may be the firms ultimate undoing, experts point out. People forget the incredible role that market conditions play, says Donna Hitscherich, a senior lecturer in discipline, finance, and economics and director of the Private Equity Program at Columbia Business School. She says PE firms know how to operate businesses and are singularly focused on turning a profit. Theres little or no incentive for PE to come in and have a business fail, as in the case of Joann, Hitscherich says. That wasnt their plan. Private equity doesnt have a crystal ball.Though Joann did receive a shot in the arm during the pandemic, when many people took up new hobbies and crowded into craft stores, the retailer has been trending downward for a while. If a private equity firm purchases a struggling retailer only to see that retailer go under, theyre just giving away money, Hitscherich says.Mixed incentivesThere are ways that PE firms do make money even if the company it purchased is circling the drain, however.Because of the laws and regulations that surround the PE industry, firms are often incentivized to extract money rather than to try and make a company succeed or survive, says Brendan Ballou, author of the book Plunder: Private Equitys Plan to Pillage America, and former special counsel with the U.S. Department of Justices antitrust division.The issue is that PE firms also take fees from businesses, like management fees or transaction fees, he says.In effect, PE firms may develop a sort of parasitic relationship with their portfolio companies, extracting money through fees even if its to the long-term detriment of the targets they acquire. This sometimes happens as part of a leveraged buyout, which may put target companies at a disadvantage, as they effectively receive a lifeline but go further into debt in order to secure it.Add in the fees on top of that, and companies that were already struggling to make money may find those struggles compounded.The investors in the PE firm certainly want the business to succeed, but thats not necessarily the case for the firm, Ballou says. As such, there are mixed incentives at play.While some PE firms may end up speeding up the death of a portfolio company, rather than helping to resurrect it, supporters of private equity maintain that it plays an important role in the economy. A report from EY, provided to Fast Company by the American Investment Council, a PE-focused advocacy organization, found that the PE sector directly employed 12 million people during 2022, and a vast majority (85%) of the companies that PE firms back are small businesses with fewer than 500 employees.So, while there is a role for private equity, there are also legitimate questions to be asked when a beloved company like Joann or Red Lobster hits the skids. For Ballou, it all comes back to the issue of crossed incentives: Failure for Joann doesnt necessarily mean failure for a PE firm.