Examining actual failed deals brings the above points to life. Here are two prominent cases – one from the United States and one from Asia – that illustrate how private equity investments can go wrong and what we can learn from them.

WeWork’s Valuation Implosion:
WeWork, the co-working space startup, was once valued at a staggering US$47 billion. Its rapid fall in 2019 became a cautionary tale for investors worldwide. Backed by massive private funding (most notably SoftBank’s Vision Fund), WeWork expanded at breakneck speed without a sustainable business model. When the company filed for an IPO, basic due diligence by public market investors uncovered glaring problems – inflated valuations, huge losses, and serious governance issues. WeWork’s charismatic CEO had engaged in self-dealing and created a culture of hype over substance. The result was a failed IPO and a collapse in valuation as the company teetered on the edge of insolvency. WeWork’s fiasco underscored the perils of neglecting fundamentals: insufficient diligence and poor governance allowed optimism to eclipse reality. For private equity and venture investors, the lesson was clear – being swept up in hype without questioning the numbers and leadership can lead to disastrous outcomes.

Carlyle’s Blocked Bid for Xugong:
Even one of the world’s most seasoned private equity firms, The Carlyle Group, has faced deal failure due to external factors. Carlyle’s attempt to acquire Xugong Group, a leading Chinese construction machinery manufacturer, in the mid-2000s is a prime example. The firm negotiated to buy a majority stake in Xugong for roughly $375 million, aiming to capitalize on China’s industrial growth. However, the deal was met with intense regulatory and political resistance in China. Local authorities and public opinion grew wary of a foreign buyout of a key domestic company. After years of delays and restructuring attempts, the acquisition was ultimately blocked by the Chinese government. Carlyle’s failed Xugong bid, widely reported by sources such as S&P Global Market Intelligence, highlighted how political and regulatory risks can override even the best-laid investment plans. Despite thorough financial analysis, the deal faltered because it underestimated national strategic sensitivities and stakeholder sentiment. This case taught investors the importance of understanding the broader environment – from government policy to public perception – especially when operating in emerging markets and cross-border deals.

These case studies show that failed deals can stem from different causes: WeWork demonstrates internal shortcomings (governance and due diligence), while Carlyle’s Xugong saga shows external forces at work. Both failures reinforced why private equity professionals must take a holistic approach to evaluating investments.