When I read about the demise of Toys “R” Us in the New York Times, I was reminded of the business books I read to understand the corporate raiders who caused the collapse of many iconic American businesses. Michael Milken, junk bond king and founder of the online charter chain K12 Inc., bought control of undervalued businesses, broke them up into parts, kept the profitable parts, discarded the unprofitable parts, and loaded them up with debt. The investors made money but the company disappeared under a mountain of debt.

The reality is that Toys “R” Us, which announced on Thursday that it would shutter or sell all of its stores in the United States, never had much chance at a turnaround.

For over a decade, Toys “R” Us had been drowning in $5 billion of debt, which its private equity backers had saddled it with. With debt payments siphoning off cash every year, Toys “R” Us could not properly invest in its worn-out suburban stores or outdated website. Sales plummeted, as Amazon captured more children’s desires — and their parents’ wallets — for Star Wars Legos and Paw Patrol recycling trucks.

Toys “R” Us is the latest failure of financial engineering, albeit one that could portend a potentially more ominous outlook for private equity in the digital era.

Most buyouts tend to work the same way. A private equity firm takes over a troubled company with the goal of sprucing up the strategy, cutting costs and overhauling the business over three or five years. But they often load up a company with debt to pay for the deal, which can prove problematic if the profits do not perk up.

Once the vultures began to pick over the bones, the company was done for.

This is the model for corporate education reform. The reformers arrive with promises of “saving poor kids trapped in failing schools.”

Then they open privately managed schools that choose the  kids they want and exclude those they don’t want. Eventually the public school system teeters on the edge of financial collapse, but the reformers say it is not their fault. But it is. It is baked into their business model. Cut costs. Hire inexperienced teachers. Work them 60-70 hours a week to be sure they don’t hang around long enough to expect a pension or healthcare. Demand free space from the public schools. Or, buy your own real estate and pay yourself exorbitant rents. Spend more on administrative overhead than on instruction.

And don’t forget to say, “It’s for the kids! Kids First! Children First! Students First!”

It is summed up in a comment by a reader of the blog:

All choice options promoted by the DOE fail the “equal access” goal of its mission. Choice is often about selection of best and discarding of the weak, problematic, expensive and struggling. Choice has resulted in increased segregation. Choice is enhancing more separate and unequal treatment of students, not equal access.