Using Bain Capital to Attack - The Other Side of the Story

[tessaesque]

More information on Bain Capital’s record.:

"When large-scale hostile takeovers appeared in the 1980s," Messrs. Holmstrom and Kaplan write, "many voiced the opinion that they were driven by investor greed; the robber barons of Wall Street had returned to raid innocent corporations. Today, it is widely accepted that the takeovers of the 1980s had a beneficial effect on the corporate sector and that efficiency gains, rather than redistributions from stakeholders to shareholders, explain why they appeared."

Henninger: Bain Capital Saved America - WSJ.com

Bain was investing in "riskier deals," said Steven N. Kaplan, a finance professor at the University of Chicago's Booth School of Business. "For every one that went bankrupt, they had one that was a screaming success. The overall effect was terrific performance" for the firm's investors.

Some of the companies that ran into trouble did so after Bain was no longer involved and new owners had taken charge. Bain declined to provide information on when its involvement in its investments ended.

Academic research provides some basis to compare this performance. A study of buyouts by various firms globally found a 5% to 8% bankruptcy rate among target companies that were taken over from 1985 to 1999.
However, this 2007 study, by Swedish academic Per Strömberg, followed the target companies only until the buyout firm's exit, not until eight years after the investment as did the Journal. So companies that went public, then filed for bankruptcy a few years later, wouldn't have been counted as bankruptcies in the study.

Romney at Bain Capital: Big Gains, Some Busts - WSJ.com

Even in an industry with such strong performance, Bain Capital stood out. During Romney’s tenure, the firm raised five private equity or buyout funds. All five outperformed the typical private equity fund. Four of the five were well into the top quartile of performance.
In other words, Bain Capital and Romney delivered strong results for their customers, better than other private equity firms that on average outperformed the public markets. Today, those customers include the California State Teachers' Retirement System and the Teacher Retirement System of Texas.

Bain invested in Staples when it had only one store, so there were likely fewer than 200 employees at the time. Bain appears to have invested in the Sports Authority when it had fewer than ten stores. Unfortunately, there are no public data to say how many people were employed at that time. At the end of 1998, Staples had more than 42,000 employees, Sports Authority had almost 14,000, Gartner Group had almost 3,000, and Steel Dynamics had over 500. So at the beginning of 1999, when Romney left Bain Capital, these four companies alone employed almost 60,000 total employees. While some of the job growth at Sports Authority came from acquisitions, there is no doubt that these four companies created tens of thousands of jobs over the period.
Fast forward to today. By the end of 2011, Staples had about 89,000 employees. Sports Authority is now a private company. The last time it reported employee numbers, in 2006, it had 14,300 employees. In addition, Gartner Group had over 4,400 and Steel Dynamics had over 6,000 employees. Using the most recently available data, these four companies alone employed almost 125,000 total employees.

Bain Capital invested in Stage Stores in 1988, when the company was young. Stage went public in 1996 with 9,606 employees. Bain realized $184 million from the investment, then reinvested $23 million for a net payout of $161 million. Employment expanded to 15,700 employees by 1999. The company was hurt by the early 2000 recession and went into chapter 11 bankruptcy in 2000. Employment dropped back to 9,800 in 2001. Subsequently, Stage left chapter 11 and today it employs 13,500 people. So, even at its lowest point, Stage Stores had more employees than when it went public. Today, Stage has roughly 3,900 more employees than it did in 1996.

Bain Capital bought Dade from Baxter in 1994. They later merged it with Behring. Bain Capital took Dade public in 1996 and cashed out $216 million. Dade went bankrupt in 2002 but it recovered, improved operating income to over $300 million, and was acquired by Siemens for over $6 billion in 2007. Bain would have been better off holding rather than cashing out. What happened to employment? When Dade went public in 1996, it employed 5,500. This increased to 7,400 with an acquisition in 1997. Employment declined thereafter, reaching a bottom of 6,000 in 2002. It rebounded to 6,400 in 2006, just before the sale to Siemens. So, overall, employment declined by 1,000 from its peak in 1997 to its final level in 2006.

How Many Jobs Did Romney Create at Bain? — The American Magazine

 

[notquiteright]

It certainly is one take on Bain. Sure slanted toward a more favorable review than many other folks are willing to give. Nice bit of slight of hand using the teacher retirement fund.

Kudos to the Wall Street Journal to stand up for corporations they touted so well before the last crash.

 

[tessaesque]

I don't think it's "slanted". It just points out the highlights of what Bain did. Since people want to discuss the highly emotionally and much smaller negatives of the company it would only make sense to counter that with the other side.

Then again, this just proves that people will only see what they want to see, facts be damned.

 

[Born Free]

That's true, to some making money is evil.

 

[Joe Steel]

More information on Bain Capital’s record.:

...

How does any of this show Romney to be good choice to make economic policy to benefit all Americans?

At best, this history might make him look like a good choice for another private equity firm. At worst, it condemns him as a plutocrat, someone who wants to run government for his own benefit and for the benefit of is class. It shows his ability to make money for his investors but says nothing of any good he would do for everyday Americans.

 

[a351]

How does any of this show Romney to be good choice to make economic policy to benefit all Americans?

At best, this history might make him look like a good choice for another private equity firm. At worst, it condemns him as a plutocrat, someone who wants to run government for his own benefit and for the benefit of is class. It shows his ability to make money for his investors but says nothing of any good he would do for everyday Americans.

At best? His record was in fact a wildly successful one, to minimize the effect Bain had on the individuals who both owned and worked for those businesses would be foolish. Plutocrat? How so? Any actions taken as governor of MA that would lead you to this conclusion? The problem with your claim is you conveniently disregarded the workers who benefited greatly from their company's success, and whose occupation and income were preserved because of outside forces such as Bain investing in companies on the verge of failure. Also, your distinction between shareholders and "everyday Americans" is laughable.

 

[Joe Steel]

At best? His record was in fact a wildly successful one, to minimize the effect Bain had on the individuals who both owned and worked for those businesses would be foolish.

Success is in the eye of the beholder. Certainly, Romney's ability to stuff his pockets with his victim's money may seem like success to someone who didn't look at the effect Romney's greed would have on whatever remained when he was gone. Others, however, see the devastation he left in his wake, the shuttered plants and impoverished workers. This hardly can be considered the model we wish for public policy. We need someone who is concerned with the interests of all Americans not just those who can buy into private equity investments.

Plutocrat? How so? Any actions taken as governor of MA that would lead you to this conclusion?

I'm thinking more of Romney's endorsement of the Ryan budget, the Path to Perdition. It cuts taxes for the rich and cuts benefits for the poor and middle class. Romney proclaimed it "marvelous" and that says it all. Should he become a policy-maker, look for him to take care of his class first.

The problem with your claim is you conveniently disregarded the workers who benefited greatly from their company's success, and whose occupation and income were preserved because of outside forces such as Bain investing in companies on the verge of failure.

That idea is a much too frequently used diversion. The beneficiaries of pirate equity, outside of the pirates, are few. One of the first things the pirates would do when the attacked a company, for instance, would be to fire the workers and hire them back at lower wages, stingier benefits and harsher working conditions. Sure they had jobs but they were nothing like the jobs they had before Romney came.

Also, your distinction between shareholders and "everyday Americans" is laughable.

Please. You're not going to assert the "everyone owns shares" nonsense, are you. The average American has no significant share ownership, a few thousand dollars, at most. Whatever interest he has in the welfare of Corporate America comes from his job not his investments.

 

[a351]

Success is in the eye of the beholder. Certainly, Romney's ability to stuff his pockets with his victim's money may seem like success to someone who didn't look at the effect Romney's greed would have on whatever remained when he was gone. Others, however, see the devastation he left in his wake, the shuttered plants and impoverished workers. This hardly can be considered the model we wish for public policy. We need someone who is concerned with the interests of all Americans not just those who can buy into private equity investments.




I'm thinking more of Romney's endorsement of the Ryan budget, the Path to Perdition. It cuts taxes for the rich and cuts benefits for the poor and middle class. Romney proclaimed it "marvelous" and that says it all. Should he become a policy-maker, look for him to take care of his class first.




That idea is a much too frequently used diversion. The beneficiaries of pirate equity, outside of the pirates, are few. One of the first things the pirates would do when the attacked a company, for instance, would be to fire the workers and hire them back at lower wages, stingier benefits and harsher working conditions. Sure they had jobs but they were nothing like the jobs they had before Romney came.




Please. You're not going to assert the "everyone owns shares" nonsense, are you. The average American has no significant share ownership, a few thousand dollars, at most. Whatever interest he has in the welfare of Corporate America comes from his job not his investments.

Victims money? Impoverished workers? You seem to be under the impression that all of the companies they invested in were flourishing and wildly successful, many of the companies were struggling to maintain profit margins, hence the need for outside intervention and capital. A select few isolated cases in which workers were layed off as a result of bankruptcy or to maintain profitability hardly establishes the overwhelming trend as you implied. As a whole, the companies he invested in were largely successful and added large amounts of employees as a result.

Not a supporter of the Ryan budget, but it would also lower tax rates on the middle class, to label it as a plutocratic endeavor would be a stretch.

Pirate equity? :roll: Seems to me you're more interested in viewing private equity through a purely emotional, political, and hyperbolic lens while complete disregarding any positive results those investments may have yielded, no matter how undeniably obvious they may be. When you decide to actually consider the facts at hand or back up any of your claims with reasonable data, let me know.

The only nonsense here is your claim that everyday Americans somehow lack the ability to become shareholders.

 

[Joe Steel]

Victims money? Impoverished workers? You seem to be under the impression that all of the companies they invested in were flourishing and wildly successful, many of the companies were struggling to maintain profit margins, hence the need for outside intervention and capital.

Bain Capital was not and is not a turn-around consulting firm. It's main interest is not saving the firms it buys. It's main interest is making money for its investors. Get the big money up front and get out is rule #1. If, occasionally, one of its victims doesn't die, that's a happy accident but it's not a reason for changing the rules.

A select few isolated cases in which workers were layed off as a result of bankruptcy or to maintain profitability hardly establishes the overwhelming trend as you implied. As a whole, the companies he invested in were largely successful and added large amounts of employees as a result.

The list of losers is longer and their stories more compelling than those of the winners and the winners are suspect, at best.

Staples? A retailer which grew large by putting other office supply retailers out of business. The 100,000 jobs already existed in storefronts. Staples just moved them into big boxes at lower wages.

Not a supporter of the Ryan budget, but it would also lower tax rates on the middle class, to label it as a plutocratic endeavor would be a stretch.

I don't think so.



The Path to Perdition is like a banquet. But the rich get to sit at the table while everyone else has to wait until they're finished to sweep-up the crumbs.

Pirate equity? Seems to me you're more interested in viewing private equity through a purely emotional, political, and hyperbolic lens while complete disregarding any positive results those investments may have yielded, no matter how undeniably obvious they may be. When you decide to actually consider the facts at hand or back up any of your claims with reasonable data, let me know.

What positive results? Since 1980, the private equity era, the income of the top 1% has soared while everyone else's has stayed the same. That disparity may not be solely attributable to private equity but private equity certainly hasn't given everyone great wealth.

It's the Inequality, Stupid

The only nonsense here is your claim that everyday Americans somehow lack the ability to become shareholders.

No nonsense about it. While most Americans own stock, just over 50% as I recall, the value of their holdings is trivial. They are shareholders the way a guy with a dollar in his pocket is like Bill Gates. They both have money.

 

[a351]

Bain Capital was not and is not a turn-around consulting firm. It's main interest is not saving the firms it buys. It's main interest is making money for its investors. Get the big money up front and get out is rule #1. If, occasionally, one of its victims doesn't die, that's a happy accident but it's not a reason for changing the rules.



The list of losers is longer and their stories more compelling than those of the winners and the winners are suspect, at best.

Staples? A retailer which grew large by putting other office supply retailers out of business. The 100,000 jobs already existed in storefronts. Staples just moved them into big boxes at lower wages.




I don't think so.

View attachment 67128693

The Path to Perdition is like a banquet. But the rich get to sit at the table while everyone else has to wait until they're finished to sweep-up the crumbs.




What positive results? Since 1980, the private equity era, the income of the top 1% has soared while everyone else's has stayed the same. That disparity may not be solely attributable to private equity but private equity certainly hasn't given everyone great wealth.

It's the Inequality, Stupid




No nonsense about it. While most Americans own stock, just over 50% as I recall, the value of their holdings is trivial. They are shareholders the way a guy with a dollar in his pocket is like Bill Gates. They both have money.

Bain was hardly a one dimensional success, they managed to preserve many faltering companies, consequentially providing employment, therefore providing a benefit to both their shareholders and the companies workforce.

Really? Somehow I doubt you're correct. If you would like to validate your claims with sourced data of any kind I'd be more than willing to reconsider. I've haven't seen any data that even so much as hints that Bain's success rate (an admittedly subjective term) was below 50% under Romney's tenure.

So income goes up for everyone above 30k and even the forecasted dip in wages for the lower class is between .2 and 2%? I think I'll stick with my dismissal of the plutocratic claim.

Seems to me you have a different definition of positive results than I, well make that than most of the public. Are you really implying that a positive result can only be considered such if all income tiers are affected simultaneously and proportionately? Only if it yields "great wealth for everyone" as you stated? I think I'll stick to the usage of the phrase. Plenty of positive results have been yielded due to private equity firms, whether or not you choose to acknowledge them is your perrogative entirely.

You claimed that being a shareholder is somehow a unrealistic and unattainable goal for the "average american" yet you claim that over half of American citizens are stockholders? You do realize that proves my point precisely correct?

 

[Joe Steel]

Seems to me you have a different definition of positive results than I, well make that than most of the public. Are you really implying that a positive result can only be considered such if all income tiers are affected simultaneously and proportionately? Only if it yields "great wealth for everyone" as you stated? I think I'll stick to the usage of the phrase. Plenty of positive results have been yielded due to private equity firms, whether or not you choose to acknowledge them is your perrogative entirely.

Public policy must benefit everyone even if it's only indirectly. Private equity benefits few. Certainly a few workers survive. On balance, though, the overwhelming weight of benefits go to the rich. That is intolerable.

You claimed that being a shareholder is somehow a unrealistic and unattainable goal for the "average american" yet you claim that over half of American citizens are stockholders? You do realize that proves my point precisely correct?

It certainly doesn't. Merely owing a few shares doesn't mean the shareholder's interests are the same as those of the large investor.

Consider an employee of a firm targeted for acquistion. He owns a few shares of the company and has received a tender for his shares. Would he be better-off accepting it for a few thousand dollars of capital gain or keeping his job?

 

[Erod]

Attacking Romney with the Bain angle is intellectually dishonest and patently stupid.

When companies grow by acquisition, massive debts and structural redundancies are typically created in the process. Restructuring is a necessary, logical part of the solution to those issues.

Without these measures, these companies would shrivel up and die. That would result in dramatically more job losses than mere restructuring.

(It is also an opportunity to rid a company of lazy, dead weight that is difficult to terminate in today's litigious world. I've certainly used it as such.)

Of course, libs think everybody should make $100 bucks an hour, get four weeks of vacation, and a pension at age 50.

 

[American]

Success is in the eye of the beholder. Certainly, Romney's ability to stuff his pockets with his victim's money may seem like success to someone who didn't look at the effect Romney's greed would have on whatever remained when he was gone. Others, however, see the devastation he left in his wake, the shuttered plants and impoverished workers. This hardly can be considered the model we wish for public policy. We need someone who is concerned with the interests of all Americans not just those who can buy into private equity investments.




I'm thinking more of Romney's endorsement of the Ryan budget, the Path to Perdition. It cuts taxes for the rich and cuts benefits for the poor and middle class. Romney proclaimed it "marvelous" and that says it all. Should he become a policy-maker, look for him to take care of his class first.




That idea is a much too frequently used diversion. The beneficiaries of pirate equity, outside of the pirates, are few. One of the first things the pirates would do when the attacked a company, for instance, would be to fire the workers and hire them back at lower wages, stingier benefits and harsher working conditions. Sure they had jobs but they were nothing like the jobs they had before Romney came.




Please. You're not going to assert the "everyone owns shares" nonsense, are you. The average American has no significant share ownership, a few thousand dollars, at most. Whatever interest he has in the welfare of Corporate America comes from his job not his investments.

What comparable experience did Obama show up to the Presidency with? <Come a bit closer so you won't miss this.>


Nothing.

 

[Joe Steel]

Attacking Romney with the Bain angle is intellectually dishonest and patently stupid.

When companies grow by acquisition, massive debts and structural redundancies are typically created in the process. Restructuring is a necessary, logical part of the solution to those issues.

Bain is not and was not a turn-around consulting firm. Their job was not to save firms. Their job was to make money for their investors. If that slashing jobs, gutting businesses and causing bankruptcies, so be it. If the target firm somehow survive, it was an accident.