Why do all these CEO's (who I'm told are the smartest) and creditors keep on falling for this? I'm guessing they are getting paid off as well?

The creditors make sense - they're getting high rates of return to compensate for that risk. LBOs are net positive for creditors, even though a lot of them blow up.

But I can't explain what CEOs and shareholders are up to; surely they know when an LBO is over-leveraged and likely to bankrupt them. Can anyone explain why these offers keep getting accepted?

> why these offers keep getting accepted?

You only hear about the failures, not the successes. So the likely explanation is somewhere between, "because it works" and "because they don't have much choice."

I guess my confusion is what the successes even look like. Are these all companies that would fold if they didn't take the buyouts? Because otherwise I can't work out what the potential upside is.

Sometimes, though distressed investments are not their primary focus.

Also, they often buy and hold. So it's not like they go about gutting every company they acquire.

They would have to be, right? Otherwise I just don't see the point.