This paper examines the multifaceted relationships among private equity ownership, leverage, operational transformation, and the resolution of financial distress in leveraged buyouts (LBOs). Drawing on foundational theoretical contributions and an extensive empirical literature, the article integrates governance theories of agency and monitoring with evidence on operating performance, investment patterns, bankruptcy processes, and post-distress restructuring under private equity stewardship (Jensen, 1989; Kaplan, 1989; Kaplan, 1991; Kaplan & Strömberg, 2009). Building from productivity and ownership-change studies and contemporary analyses of distress resolution, the paper synthesizes perspectives that explain when private equity sponsors create value and when they raise the risk of distress or fire-sale outcomes (Lichtenberg & Siegel, 1987; Hotchkiss, Stromberg & Smith, 2021; LoPucki & Doherty, 2002; LoPucki & Doherty, 2007). The contribution is a richly elaborated theoretical narrative that connects sponsor incentives, debt design (including payment-in-kind instruments), and legal-institutional environments to firm-level outcomes, while evaluating conflicting empirical findings concerning innovation, long-run investment, and systemic implications for stakeholders including employees, creditors, and consumers (Lerner, Sorensen & Strömberg, forthcoming; Morgenson & Rizzo, 2018; Tykvova & Borell, 2012). The paper also integrates recent sectoral and health-care-related evidence on private equity ownership effects on operational outcomes and quality measures (Borsa et al., 2023) and incorporates new research on PIK amendments and capital-structure outcomes in sponsor-backed LBOs (Shounik, 2025). The discussion emphasizes mechanistic explanations, counterarguments, and boundary conditions that reconcile heterogenous results in the literature and proposes a research agenda to clarify causal pathways linking private equity control, leverage dynamics, and long-run firm value.