PRIVATE EQUITY PERSPECTIVE: Mitt Romney as Occupy Wall Street’s Gordon Gekko
Moves in private equity and venture capital investing
“Greed is good,” may not be the mantra it was back in the LBO-laced 1980s, but the bad press presidential candidate Mitt Romney is getting over his tenure as a private equity investor demonstrates that PE still has a long way to go when it comes to promoting a positive image.
Romney traces his roots in PE back to 1984, when he founded Bain Capital, originally a private equity and venture capital spin-off of consultancy Bain & Co., where he had worked for seven years.
“Under his leadership, Bain Capital helped to launch or rebuild hundreds of companies, including household names such as Staples, Domino's Pizza, and The Sports Authority,” touts Romney’s campaign website.
But, as the Los Angeles Times has reported, during Romney’s tenure at Bain Capital, “four of the 10 companies Bain acquired declared bankruptcy within a few years, shedding thousands of jobs,” citing a prospectus that was designed to entice investors in Bain Capital and was prepared by Deutsche Banc Alex. Brown in 2000.
“Bain investors profited in eight of the 10 deals, including three of the four that ended in bankruptcy,” says the newspaper.
Romney’s Republican competitors and detractors are making the most of these tidbits. Tapping into the public’s mixed feelings about private equity and venture capital in these days of Occupy Wall Street, former House Speaker Newt Gingrich, Texas governor Rick Perry and others are portraying Romney as a corporate raider and a vulture.
For his part, Romney acknowledges that some of Bain’s investments did indeed lead to a significant number of jobs lost – “a few thousand” – but that others led to more significant job gains.
"The net of the two is pretty clearly -- well over 100,000 jobs," he tells the LA Times. "The reality is in the private sector, that there are some businesses that are growing and thriving -- and we were fortunate enough to be able to be part of that in a small way -- and there's some businesses that have to be cut back in order to survive to try to make them stronger. Sometimes you're successful at that and sometimes you're not.”
Romney’s math may be accurate, but perception is reality.
Or, as Gordon Gekko put it, “Money itself isn't lost or made, it's simply transferred from one perception to another.”
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