Since filing for bankruptcy in July, Mervyn's has been closing stores and fighting for survival in a much-smaller form. But now the company has announced that it will close its 149 remaining stores, with going out of business sales set to begin shortly.

In a press release, CEO John Goodman announced that "We are disappointed with this outcome but the Company's declining liquidity position and the extremely challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action."

The company was taken private by a group including Cerberus and Sun Capital back in 2004, and that deal is now the subject of considerable controversy. Last month, the bankrupt company sued its former owners, alleging that the deal was structured to separate the operations from the real estate, and that the private equity owners then proceeded to sell real estate, pay themselves dividends, jack up lease payments, and essentially transfer value from the chain to the private equity buyers.

It remains to be seen what will come of that lawsuit but, if it goes to trial, it will be an interesting case that looks at the role of private equity in the financial world.

One of the most common complaints about private equity companies (and activist investors, corporate raiders, etc.) is that their relentless focus on making a quick profit results in the looting of companies, job losses, and so on.

That theory will be tested in court: Mervyn's LLC has sued its former private-equity owners -- including Cerberus and Sun Capital -- alleging that their profiteering tactics led to the chain's bankruptcy. When the $1.26 billion deal was consummated in 2004, The Wall Street Journal reports that (subscription required) "the deal was structured as two separate transactions -- one for the retailer and a second one for the retailer's real estate. This complicated structure, the suit alleges, enriched the private-equity firms while leaving the retail operations insolvent."

The firms then sold off real estate, paid themselves dividends, jacked up lease payments, and essentially transferred value from the chain to the private equity buyers, according to the lawsuit.

This will be a must-follow case -- assuming it isn't settled quickly and confidentially -- for those looking to understand the larger effects of buyout shops. I'm skeptical of the notion that private equity firms destroy companies and, if that was indeed the case with Mervyn's, it may have been a result of the complex structure and self-dealing.

In most cases however, there is little money to be made bankrupting something for which you pay hundreds of millions -- or billions.

Over the past few years, private equity funds have purchased many brick-and-mortar companies. But there's a problem: soaring energy prices.

Just look at Jevic Transportation, which has filed for bankruptcy. The trucking company was bought out by Sun Capital in July 2006.

Actually, the shut-down was not just the result of high fuel costs. Other problems included tough credit markets and increased insurance costs. Oh, and the slowing economy didn't help.

Unfortunately, Jevic had to lay off about 90% of its 1,500 employees (of which 1,000 were from Burlington County, New Jersey). The company got its start 27 years ago from a husband-and-wife team, Harry and Karen Muhlschlegel.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Lately, it's been tough for furniture retailers. After all, Wickes Furniture, owned by private equity operator Sun Capital Partners, recently filed for Chapter 11 bankruptcy.

So, this might dampen interest in the sector? Perhaps not. Interestingly enough, Sun Capital wants to make a bid for Furniture Brands International (NYSE: FBN). Keep in mind that the fund is the #3 shareholder in the company (a 9.4% equity stake). The offer is a bit vague though as it is a "substantial premium."

Jason Bernzweig, the vice president at Sun, has sent a letter to Furniture Brands. Simply put, he thinks that – given the tough macroeconomic environment – the company needs to take aggressive action on cost cutting. To this end, he thinks this can be best accomplished as a private company (where there is less pressure to take short-term actions).

Bernzweig also mentioned that there is buyout interest from two strategic players.

In other words, there's lots of pressure on Furniture Brands to do a deal – and fast.

In today's trading, the company's stock price is up 20% to $12.48.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.