On Mitt Romney's Defense Of Bain Capital And The Private Equity Industry - Here Are Some Facts

Zero Hedge ^ | January 10, 2012 | Tyler Durden

[Zakeet]

Lately, Bain founder and GOP presidential candidate Mitt Romney has found himself in a spirited defense of the private equity industry, doing all he can to spin decades of data which confirm, without failure, that PE Leveraged Buy Outs are nothing but "efficiency maximizing" transactions whose only goal is the "maximization" of EBITDA in the pursuit of dividend recap deals, IPOs or outright sales, while loading up the company with untenable amounts of leverage. All this with a 3-5 year investment horizon, which ignores the long-term viability of a company and seeks to streamline (read fire as many as possible) operations as quickly as possible in the goal of maximizing short-term returns. We wish him luck in his endeavor. As for the other side of the equation, we recreate a post we penned back in November 2009 which analyzes just how effective the mega-LBOs have been for the economy, and the workers involved. In other words - the facts. In a nutshell, here they are: "The Disastrous Performance Of Private Equity: Of The Top 10 LBOs, 6 Are In Distress, 4 Have Defaulted." Read on for the full details.

[RoosterRedux]

In our current economic environment coupled with a hostile MSM, there is no way a person with this baggage will get the votes to be president.

And that's the bottom line!

Obama and Axelrod can't wait to make minced meat out of Romney. He is tailor-made for their ideology of class warfare.

[tallyhoe]

I’m a Capitalist and this is what Capitalism is about. Some win and Some lose. There is no guaranteed outcome! I am for Bain Capital and companies like them they supply the Capital for companies to expand. Sometimes it pays off and sometimes you have to go in and liquidate the business. That is how it works!

[qwerty1234]

So, all of a sudden we (conservatives) are expecting our next president to create jobs for us, wow for a minute I thought I was on DU instead of FR. The mantra of the Republicans party has been that ‘government doesn’t create jobs’, and the government should get out of the way. I still believe this, but reading some of the posts on this thread leads me to believe that somehow unless Romney can create jobs, his presidency will be a failure.

Far as I can tell, Romney fired thousands of people in under-performing companies that were likely to go bankrupt anyway, and managed to make a profit in the process.

If Romney gets elected, I certainly HOPE that he will fire 100’s of thousands of inefficient people from that biggest of all inefficient employers - the Federal government.

[tallyhoe]

I’m for Bain Capital, but I am not a Romney supporter! I’m for Newt!

[bondserv]

Just because abortion is legal does not make it right. Here is something I posted on this topic the other day.

The Founders warned about a free society that lacks moral clarity.

Unions were the answer in the era where capitalism wasn’t being moral and taking care of the employees. That ended up biting us in the butt.

The important thing is to use the bully pulpit to project righteousness and responsibility. Judeo-Christian principles need to be back in vogue!

[KJC1]

Thank you for summarizing the point here. It seems like it’s getting missed by some people.

[rodeo-mamma]

You might be surprised, watch out for people who claim to be forgiven then turn around and promote the marxist point of view for their own selfish gain. If it’s God’s will, and if it’s a lie, anything is possible. All it takes is a person with a pair to overcome this slander. Be careful about siding with the Marxists, because when the workers become more important then the company that employs them, that’s a recipe for Marxism. The company must survive, so they can rehire when things turn around, but if companies are destroyed because the workers are more important, the company will be destroyed forever, causing more socialism, it’s a real evil, and anyone who suggests Marxism for their own selfish gain isn’t a good person at all and should not be trusted.

[onyx]

Is “Bain, Drip, Drip, Drip,” posted?

[RoosterRedux]

I’m not opposed to Bain Capital and what they do. Somebody needs to put capital into companies and businesses.

You obviously don't understand LBO's.

The idea is to buy companies with subordinate debt (i.e. high yielding junk bonds) and very little equity.

The new owners cut every possible element of cost (often reducing product quality, some necessary jobs, and employee benefits). When a company survives, there is a huge payout for the new owners...if it fails to survive, the employees get fired and bondholders get what is leftover from the sale of assets.

[elpadre]

I understand the company was in deep trouble when Bain took it over. Their Steelworker union was a major player in the downfall.

All of those old steel mills have expired, unable to compete with the newer mills established after WWII in the US and Europe.

This to which you describe is called Capitalism.

[indthkr]

capitalism vs. venture capitalists bump for later......

[Utmost Certainty]

I don’t mind what Bain Capital was doing. AFAIK, what they were doing was engaging in legit free-market practices, and there is absolutely a place and purpose in the grand economic scheme of things for what investment firms like Bain Capital do. Yes, it could be fairly coined ‘vulture corporatism’—but consider that even vultures and scavengers serve a vital role in an ecosystem.

So instead of going off the rails and getting Michael Moore-ish about this as some are apparently apt to do, IMO the more interesting narrative here is that it undermines Romney’s credibility as a bona fide “job creator.” Because obviously he wasn’t some entrepreneurial businessman with his finger on the dynamic pulse of the “real economy.” Rather, he was just a finance guy, and that’s a very different kind of acumen than a businessman.

[cuban leaf]

I do agree with that sentiment. I’ve often said that companies do not exist to employ people, but that is a very positive side benefit. And that is how capitalism works.

That said, the thing that is repugnant is the “destroying jobs for profit” concept. It is part of the “ugly” side of capitalism. And all human systems have an “ugly” side.

[TheOldLady]

We wish it grew there
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[tallyhoe]

that is what I said!!!

You obviously don’t understand LBO’s.

[tcrlaf]

Uhhh...

There is a LOT MORE to the HS TEch story than that.

Did you know the OTHER GS Technology steel mill , in Fort Wayne, Indiana is still operating, employing 1,150 people?

It wasn’t plagued by a RADICAL Steelworkers Union shop prone to wildcatting that cost it the largest three of five customers BEFORE Bain bought it.

[RoosterRedux]

Good job!

[Lakeshark]

I don’t think so, this may be better though, it links to it, and summarizes some of the important posts about it: http://legalinsurrection.com/2012/01/im-not-going-to-sit-here-while-critics-of-bain-badmouth-the-united-states-of-america/

[SoConPubbie]

But what Bain did is market capitalism at its best. People who criticize what Bain did are not conservative. They are economic populists or so blinded by their dislike of Romney that they will use any like of attack against him.

Whether or not what Bain and Romney were doing was Capitalism is not the point.

Both of you are still missing the following salient points:

1. This article is not an attack, it lays out an objective view of what Myth's business experience actually is.
2. Mitt's experience at Bain is the sole basis of the Myth that Romney is some type of Business Guru and is best qualified to try and turn around our horrible economy. As with most of the nonsense concerning Myth, it is all "Smoke and Mirrors" and this articles lays bare the fact that his "Experience" no more qualifies him to be the best man to fix the economy than I am qualified to perform surgery on you.

[RoosterRedux]

I am a retired investment banker...part of my job was raising capital for LBO’s. My firm was very careful in its commitment to such transactions (unlike Drexel Burnham Lambert) but we were sufficiently active to know the business well.