Why Bain Killed Good Companies and Good Jobs - I Break It Down [View all]

[jsmirman]

This isn't filled with stunning revelations, but I wanted to explain in simple terms that many companies killed by Bain were targeted because they were functional companies doing active business. The workers that Mitt Romney and Bain left behind had good jobs at functioning companies. The proof? A fundamental proposition of the Bain play demands that the company be "healthy enough to kill in the Bain way."

Here is the breakdown I put together tonight:

A simple truth about Bain's go to move - that everyone should understand and think on: much of the time Bain Capital had to target functioning companies to kill. Why? Because you can't load up a company with debt unless that company has the cash flows (also known as actively doing business) to support that debt.

And loading a company up with debt is the go to move for vulture capitalists looking to take an initial pie, increase the size of the thing, and then take some choice slices for themselves (this is also known as immediately paying off one's initial investment).

So there was nothing markedly wrong with many of the companies Bain preyed upon. I'm repeating myself here, but note that a sick company, a failing company, cannot support Bain's debt games (a pie with fundamentally bad ingredients simply cannot be expanded).

The final step was, of course, bankruptcy and auctioning off the assets - sales that yielded further returns on Bain's investment. What does this all mean? Well, many things - I mean, it's a disgusting way of doing business that even many of the sharpest businessmen in the country eschew. But it also means that one of Bain's core strategies involved taking functioning companies that supported good steady jobs, making those companies sick with debt, and leaving behind shuttered gates and vanished jobs. Good jobs.

Those companies' only crime - they were successful enough to be prime targets for the vultures at Bain. That's Mitt Romney.