I?m all in favor of piling on Mitt Romney for any number of reasons: his come lately embrace of hard right conservatism, his periodic malapropisms (?I like being able to fire people?) and above all, the nonchalance with which he displays a dazzling shortage of principles by incessantly flip-flopping on issues, sometimes the same day.
But these latest salvos being fired at his service as the founder and head of Bain Capital go too far. Having spent nearly three decades on Wall Street, when it comes to Bain Capital, I feel equipped ? some might say too equipped ? to parse fact from fiction. (Full disclosure: In the post-Romney era, I worked with Bain Capital on several projects.)
Continue ReadingMost important, Bain Capital is not now, nor has it ever been, some kind of Gordon Gekko-like, fire-breathing corporate raider that slashed and burned companies, immolating jobs wherever they appear in its path
Wall Street has its share of the vulture capitalists that Texas Gov. Rick Perry enjoyed mocking in South Carolina earlier this week. But Romney was almost the furthest thing from Larry the Liquidator.
Instead, with modest exceptions (keep reading to learn more about these), Bain Capital was a thoroughly respectable ? nay, eminent ? investment manager that successfully discharged its responsibility of earning high returns for its investors by deploying capital in companies privately rather than by buying shares in the public market. (Hence the name, private equity.)
Over Bain Capital?s 27 years, its private investments generally fell into two buckets. The firm, particularly in its early years, made dozens of venture capital investments ? taking stakes of a few million dollars or less in young companies, in hopes that they would grow and prosper. A good example: Its investment of $2.5 million in Staples in 1986.
As the years clicked along, Bain?s emphasis shifted toward what was then known as leveraged buyouts, and is now called private equity. Typically, those investments are larger, made in more developed companies and heavily financed with debt. In 1998, for example, Bain invested $189 million in the pizza chain Domino?s, from which it reportedly reaped a fivefold return.
Overall, Bain Capital?s record was extraordinary, among the best in the business. According to a Bain placement document, through the end of 1999 (effectively, when Romney left), the firm had achieved annual returns of 88 percent per year.
That is not only wildly more than the single digit returns most investors achieve by buying stocks or bonds, it is far higher than those of typical private equity or venture capital firms.
Of course, a number of its early stage investments failed. That is the nature of venture capital ? an industry not unlike baseball in that a .300 batting average can be excellent performance. But who can quarrel with an investment firm trying to nurture and finance young companies?
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