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Thread: What is the truth about Bain Capital?

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    What is the truth about Bain Capital?

    Here's the truth I found. What demonizing truths are out there? There are certainly none here:

    Romney and his partners raised $37 million over a one-year period to start the firm...a venture capital company founded in 1984. By 1985, Romney considered closing the company, as they were having a hard time finding companies to invest in. As an example, their first major deal was to bankroll Staples in 1986. It has grown from zero stores to 2000 stores by 2008, returning their initial $4.5 million investment sevenfold. There are quite a few other successful venture capital investments that Bain elected to make -- returning an average 50% annualized return to the company. People get really rich that way. IOW, these guys could pick 'em.

    In 1989, Bain broadened its strategy from venture capital provider to include leveraged buyouts and growth capital investments. By the end of 1990, Bain had financed 35 companies with combined revenues of $3.5 billion. Their success rate in picking the right companies was about 50/50. Losing their capital in 50% of their deals. Hitting it big in the other 50%.

    Bain Capital - Wikipedia, the free encyclopedia

    What did this company do that so evil?
    I'm reading a book on anti-gravity. I can't put it down.

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    Re: What is the truth about Bain Capital?

    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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    Re: What is the truth about Bain Capital?

    Mitt Romney needs to stay where he's best suited - as a man who is a captain of industry. I applaude his business acumen, but he doesn't belong in the White House. He belongs in a board room.

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    Re: What is the truth about Bain Capital?

    Here's another article detailing the Romney/Bain way:

    Yet, there is another version of the Bain way that I experienced personally during my 17 years as a deal-adviser on Wall Street: Seemingly alone among private-equity firms, Romney’s Bain Capital was a master at bait-and-switching Wall Street bankers to get its hands on the companies that provided the raw material for its financial alchemy. Other private-equity firms I worked with extensively over the years — Forstmann Little, KKR, TPG and the Carlyle Group, among them — never dared attempt the audacious strategy that Bain partners employed with great alacrity and little shame. Call it the real Bain way.
    When Romney ran Bain Capital, his word was not his bond - The Washington Post
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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    Re: What is the truth about Bain Capital?

    Quote Originally Posted by AdamT View Post
    I suggest you read links like this more carefully. There is not one concrete example from which a discerning reader could come to any reasonable conclusion.

    He's this. He's that. He loaned OPM. He made them pay it back.
    That's a terrible link. You're just drinking the Kool-Ade.
    I'm reading a book on anti-gravity. I can't put it down.

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    Re: What is the truth about Bain Capital?

    Quote Originally Posted by MaggieD View Post
    I suggest you read links like this more carefully. There is not one concrete example from which a discerning reader could come to any reasonable conclusion.



    That's a terrible link. You're just drinking the Kool-Ade.
    I don't think you read it very carefully, if you read it at all.
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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    Re: What is the truth about Bain Capital?

    Quote Originally Posted by AdamT View Post
    I don't think you read it very carefully, if you read it at all.
    Why don't you copy/paste the concrete examples from your link? You're just pickin' up what they're puttin' down. And I most certainly did read the article.

    I don't usually pick up what's put down and believe it. I pick it up, turn it over, hold it up to the light, and then make my decision. That's the reason I posted this thread. I was hoping people had actual, you know, real-world examples of why this company is such an evil-doer.

    I just may be disappointed.
    I'm reading a book on anti-gravity. I can't put it down.

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    Re: What is the truth about Bain Capital?

    Quote Originally Posted by MaggieD View Post
    Why don't you copy/paste the concrete examples from your link? You're just pickin' up what they're puttin' down. And I most certainly did read the article.

    I don't usually pick up what's put down and believe it. I pick it up, turn it over, hold it up to the light, and then make my decision. That's the reason I posted this thread. I was hoping people had actual, you know, real-world examples of why this company is such an evil-doer.

    I just may be disappointed.
    If you read the article, I can't imagine how you missed this very long, very concrete example:

    'I'm not a Romney guy, because I'm not a Bain guy," says Lenny Patnode, in an Irish pub in the factory town of Pittsfield, Massachusetts. "But I'm not an Obama guy, either. Just so you know."

    I feel bad even asking Patnode about Romney. Big and burly, with white hair and the thick forearms of a man who's stocked a shelf or two in his lifetime, he seems to belong to an era before things like leveraged debt even existed. For 38 years, Patnode worked for a company called KB Toys in Pittsfield. He was the longest-serving employee in the company's history, opening some of the firm's first mall stores, making some of its canniest product buys ("Tamagotchi pets," he says, beaming, "and Tech-Decks, too"), traveling all over the world to help build an empire that at its peak included 1,300 stores. "There were times when I worked seven days a week, 16 hours a day," he says. "I opened three stores in two months once."

    Then in 2000, right before Romney gave up his ownership stake in Bain Capital, the firm targeted KB Toys. The debacle that followed serves as a prime example of the conflict between the old model of American business, built from the ground up with sweat and industry know-how, and the new globalist model, the Romney model, which uses leverage as a weapon of high-speed conquest.

    In a typical private-equity fragging, Bain put up a mere $18 million to acquire KB Toys and got big banks to finance the remaining $302 million it needed. Less than a year and a half after the purchase, Bain decided to give itself a gift known as a "dividend recapitalization." The firm induced KB Toys to redeem $121 million in stock and take out more than $66 million in bank loans – $83 million of which went directly into the pockets of Bain's owners and investors, including Romney. "The dividend recap is like borrowing someone else's credit card to take out a cash advance, and then leaving them to pay it off," says Heather Slavkin Corzo, who monitors private equity takeovers as the senior legal policy adviser for the AFL-CIO.

    Bain ended up earning a return of at least 370 percent on the deal, while KB Toys fell into bankruptcy, saddled with millions in debt. KB's former parent company, Big Lots, alleged in bankruptcy court that Bain's "unjustified" return on the dividend recap was actually "900 percent in a mere 16 months." Patnode, by contrast, was fired in December 2008, after almost four decades on the job. Like other employees, he didn't get a single day's severance.

    I ask Slavkin Corzo what Bain's justification was for the giant dividend recapitalization in the KB Toys acquisition. The question throws her, as though she's surprised anyone would ask for a reason a company like Bain would loot a firm like KB Toys. "It wasn't like, 'Yay, we did a good job, we get a dividend,'" she says with a laugh. "It was like, 'We can do this, so we will.' "

    At the time of the KB Toys deal, Romney was a Bain investor and owner, making him a mere beneficiary of the raping and pillaging, rather than its direct organizer. Moreover, KB's demise was hastened by a host of genuine market forces, including competition from video games and cellphones. But there's absolutely no way to look at what Bain did at KB and see anything but a cash grab – one that followed the business model laid out by Romney. Rather than cutting costs and tightening belts, Bain added $300 million in debt to the firm's bottom line while taking out more than $120 million in cash – an outright looting that creditors later described in a lawsuit as "breaking open the piggy bank." What's more, Bain smoothed the deal in typical fashion by giving huge bonuses to the company's top managers as the firm headed toward bankruptcy. CEO Michael Glazer got an incredible $18.4 million, while CFO Robert Feldman received $4.8 million and senior VP Thomas Alfonsi took home $3.3 million.

    And what did Bain bring to the table in return for its massive, outsize payout? KB Toys had built a small empire by targeting middle-class buyers with value-priced products. It succeeded mainly because the firm's leaders had a great instinct for what they were making and selling. These were people who had been in the specialty toy business since 1922; collectively, they had millions of man-hours of knowledge about how the industry works and how toy customers behave. KB's president in the Eighties, the late Saul Rubenstein, used to carry around a giant computer printout of the company's inventory, and would fall asleep reading it on the weekends, the pages clasped to his chest. "He knew the name and number of all those toys," his widow, Shirley, says proudly. "He loved toys."

    Bain's experience in the toy industry, by contrast, was precisely bupkus. They didn't know a damn thing about the business they had taken over – and they never cared to learn. The firm's entire contribution was $18 million in cash and a huge mound of borrowed money that gave it the power to pull the levers. "The people who came in after – they were never toy people," says Shirley Rubenstein. To make matters worse, former employees say, Bain deluged them with requests for paperwork and reports, forcing them to worry more about the whims of their new bosses than the demands of their customers. "We took our eye off the ball," Patnode says. "And if you take your eye off the ball, you strike out."

    In the end, Bain never bothered to come up with a plan for how KB Toys could meet the 21st-century challenges of video games and cellphone gadgets that were the company's ostensible downfall. And that's where Romney's self-touted reputation as a turnaround specialist is a myth. In the Bain model, the actual turnaround isn't necessary. It's just a cover story. It's nice for the private equity firm if it happens, because it makes the acquired company more attractive for resale or an IPO. But it's mostly irrelevant to the success of the takeover model, where huge cash returns are extracted whether the captured firm thrives or not.

    "The thing about it is, nobody gets hurt," says Patnode. "Except the people who worked here."
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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    Re: What is the truth about Bain Capital?

    Quote Originally Posted by AdamT View Post
    If you read the article, I can't imagine how you missed this very long, very concrete example:
    That story is NOT at your link. Adam, do you think I am stupid?

    Edit: This is the post I responded to:

    Quote Originally Posted by AdamT View Post
    Neither of your stories is at that link.
    Last edited by MaggieD; 09-03-12 at 12:11 PM.
    I'm reading a book on anti-gravity. I can't put it down.

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    Re: What is the truth about Bain Capital?

    Here's another concrete example that somehow alluded your careful reading:

    Take a typical Bain transaction involving an Indiana-based company called American Pad and Paper. Bain bought Ampad in 1992 for just $5 million, financing the rest of the deal with borrowed cash. Within three years, Ampad was paying $60 million in annual debt payments, plus an additional $7 million in management fees. A year later, Bain led Ampad to go public, cashed out about $50 million in stock for itself and its investors, charged the firm $2 million for arranging the IPO and pocketed another $5 million in "management" fees. Ampad wound up going bankrupt, and hundreds of workers lost their jobs, but Bain and Romney weren't crying: They'd made more than $100 million on a $5 million investment.
    "The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. ... It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    -- Adam Smith

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