Technically true, but RoE expectations from a PE firm are typically a lot higher than from the original owners of a small business.

And the LBO model is much less resilient to economic headwind. Let's assume a 25% EBITDA margin business, with most costs fixed (like the clinic example). Unfortunately revenue drops 20% because of external factors. It would maybe have a tiny profit left, tax would also be tiny and there is no interest to pay. The shareholders receive near zero, absorbing most of the problem for a year waiting for times to get better.

Now the same business, same reported EBITDA, but paying a large interest sum every year to the bank. If revenue drops 20% they can't pay their interest, and banks don't just wait for next year. Now the business has the restructure, agree with the banks what that looks like, or face a bankruptcy risk.

While the new PE shareholder has a better RoE due to leverage in the upside scenario, the business (and the PE) could be completely cooked in a downside scenario. For the PE this is a calculated risk, they optimise the overall portfolio. But for the employees and customers this isn't a great scenario.

> the vet clinic now requires less revenue to maintain or even increase its return to equity

The small-town vet would have probably accepted a lower RoE. More critically, they’d have been more willing to absorb shocks to said RoE than a lender will to their debt payments.