Examples of leveraged buy-outs working as intended?

I've been listening to The Great Fail podcast lately, which (mostly) concerns failed businesses. A common factor seems to involve leveraged buy-outs. As in, a group of investors borrow a bunch of money, buy a struggling business, transfer the debt to the business, cut costs and liquidate assets, then declare bankruptcy, discharging the debt used to purchase the business. Leaving the investors better off, but the business failed, and the lending entity out most of the loaned money.

What I wondered is whether this ever works as intended. Does this process ever actually turn the business around? If not, why do banks agree to this? Frankly, why is it legal at all? If a business fails, why should the new owners be allowed to avoid having any skin in the game?