Bain Capital: Economic angel or vampire?

[pstokely]

Source: Kansas City Star

"Jeff Jones’ experience with Bain Capital wasn’t so sweet.

Jones was a worker at Kansas City-based GST Steel when Bain took the aging company into bankruptcy in 2001, tossing 750 people out of work.

“All they did was pillage the profits out of it,” he said.

Is Bain a predatory vampire sucking workers’ lifeblood? Or is it a capitalist angel injecting crucial seed money for job-providing startups?"



http://www.kansascity.com/2012/05/26/3629165/bain-capital-economic-angel-or.html

[joeybee12]

1. Easy answer...vampire...knr

[aquart]

2. List the startups and their total American employees, salary range percentages.

Now do the same for raped companies, jobs lost, salary and pensions lost...

It's arithmetic. Where's the list?

[Igel]

3. GST Steel is a kind of blot test.

What you see depends on your angle and your timing.

If you looked the year after Bain bought it--a failing company about to be flushed by the consequences of recession in '91 and '92 and international competition--Bain was clearly the hero. It was expected that GST would simply be sold off for scrap. Instead Bain saved hundreds of jobs by dumping in a truckload of money for infrastructure upgrades.

If you looked a few years later, they'd made GST profitable. Bain was taking dividends from a profitable company. Nothing untoward there. They put in money; they get money back out. They got out a lot more money than they put it, but the company was still turning a profit and looked to be long-term solvent. (I do the same thing, I'd like to think, when I put money in a bank. I intend to get it back out. Preferably with interest.)

We can argue whether Bain took out too much money for a few years or whether they should have reinvested more in infrastructure. Nonetheless, the dividends only lasted a couple of years. Perhaps 3.

Then if you look a few years later the entire steel industry was staggering. Clinton complained about the Chinese dumping steel. Lots of steel companies folded. The one my mother got her pension from was sold off in pieces and, when all the courtcases were resolved, ceased to exist.

A couple of years after that GST Steel finally went bankrupt and was liquidated. It was one of a number of related companies that Bain held but was the only one to get the axe. It was also the only one insolvent.

I think I'd have probably done the same kinds of things as Bain did. I might argue it would have been better to let GST go under in '93 so the employees could get on with their lives and find other jobs. I don't think that would be a popular argument. I could argue that the proper role of investors is to donate to losing enterprises--which I'd also have to apply to myself when I save money in a bank that might fail. I think a lot of people would like the idea as long as it didn't apply to any money they have invested in banks, pensions, or IRAs.