Ryvicke
04-19-2012, 04:30 PM
Everyone's read long-form journalism on Bain Capital by now, but I thought this Seattle Weekly piece was nicely organized and succinct. Having worked for two years at a leveraged buyout private equity firm (though specialized in media companies) I learned how this worked in 2006-7 and it surprised the hell out of me. The brilliance is you make millions whether the company you buy tanks or does well, the one rule: never add jobs.
http://www.seattleweekly.com/2012-04-18/news/mitt-romney-american-parasite/
James Sanderson had encountered a rare moment of industrial harmony.
It was the early 1990s, and the 750 men and women at Georgetown Steel were pumping out wire rods at peak performance. They had an abiding trust in management's ability to run a smart company. That allegiance was rewarded with fat profit-sharing checks. In the basement-wage economy of Georgetown, South Carolina, Sanderson and his co-workers were blue-collar aristocracy.
"We were doing very good," says Sanderson, president of Steelworkers Local 7898. "The plant was making money and we had good profit-sharing checks, and everything was going well."
What he didn't know was that it was about to end. Hundreds of miles to the north in Boston, a future presidential candidate was sizing up Georgetown's books.
...
His formula was simple: Bain would purchase a firm with little money down, then begin extracting huge management fees and paying Romney and his investors enormous dividends.
...
Bain would slash costs, jettison workers, reposition product lines, and merge its new companies with other firms. With luck, they'd be able to dump the firm in a few years for millions more than they'd paid for it.
But the beauty of Romney's thesis was that it really didn't matter if the company succeeded. Since he was yanking out cash early and often, he would profit even if his targets collapsed.
Worth reading all of. I do wonder how someone that thrived with this mentality would run the country.
http://www.seattleweekly.com/2012-04-18/news/mitt-romney-american-parasite/
James Sanderson had encountered a rare moment of industrial harmony.
It was the early 1990s, and the 750 men and women at Georgetown Steel were pumping out wire rods at peak performance. They had an abiding trust in management's ability to run a smart company. That allegiance was rewarded with fat profit-sharing checks. In the basement-wage economy of Georgetown, South Carolina, Sanderson and his co-workers were blue-collar aristocracy.
"We were doing very good," says Sanderson, president of Steelworkers Local 7898. "The plant was making money and we had good profit-sharing checks, and everything was going well."
What he didn't know was that it was about to end. Hundreds of miles to the north in Boston, a future presidential candidate was sizing up Georgetown's books.
...
His formula was simple: Bain would purchase a firm with little money down, then begin extracting huge management fees and paying Romney and his investors enormous dividends.
...
Bain would slash costs, jettison workers, reposition product lines, and merge its new companies with other firms. With luck, they'd be able to dump the firm in a few years for millions more than they'd paid for it.
But the beauty of Romney's thesis was that it really didn't matter if the company succeeded. Since he was yanking out cash early and often, he would profit even if his targets collapsed.
Worth reading all of. I do wonder how someone that thrived with this mentality would run the country.