Monday, September 10, 2012

How Many Jobs did Mitt Romney Help Create at Bain Capital?

Bain Capital - How Businesses Improve an Economy and the Quality of Life for All of Us.

The president questions Romney’s experience in the private sector because he says Romney was more focused on making money than creating jobs. The fact that he thinks those two goals are opposed to each other tells you why this country has gotten into such deep economic trouble. If business owners don’t make a profit, then they cannot afford to hire new employees. And if they hire more people than is financially responsible to pay, then they imperil their company and put employee’s job at risk (you can’t spend more money that you make).

Now, these are not profound observations about the way the economy works. They are things that everyone who’s ever had to meet a payroll understands instinctively; whether at a mom and pop store or a major corporation. So what does it say that there are such concepts that seem to be too complicated for the President of the United States to understand?

Among Bain Capital’s investments under Romney, the large job creators are clearly Staples and Sports Authority. Both of these were small, young companies when Bain Capital invested in them. Bain invested in Staples when it had only one store; there fewer than 300 employees at the time. Bain appears to have invested in the Sports Authority when it had fewer than ten stores. Unfortunately, there are no public data to say how many people were employed at that time. At the end of 1998, Staples had more than 42,000 employees, Sports Authority had almost 14,000, Gartner Group had almost 3,000, and Steel Dynamics had over 500. So at the beginning of 1999, when Romney left Bain Capital, these four companies alone employed almost 60,000 total employees. While some of the job growth at Sports Authority came from acquisitions, there is no doubt that these four companies created tens of thousands of jobs over the period.

Fast forward to today. By the end of 2011, Staples had about 89,000 employees. Sports Authority is now a private company. The last time it reported employee numbers, in 2006, it had 14,300 employees. In addition, Gartner Group had over 4,400 and Steel Dynamics had over 6,000 employees. Using the most recently available data, these four companies alone employed almost 125,000 total employees.

Bain Capital also successfully turned around several existing businesses during Romney’s tenure. For example, Bain Capital bought Wesley Jessen Vision Care for $6 million in 1994. It had been a division of Schering Plough and was not profitable. Bain Capital and a new CEO turned it around and sold it to Ciba Geigy for over $300 million in 2001. When it was sold, it appears to have had 2,600 employees. Today, the company is part of Ciba Vision.

Overall, then, the companies Bain Capital funded under Romney have created tens of thousands of jobs using any way of measurement.

Now I realize that fiscal policy and growing the economy is but one area of measurement in which we decide to vote for a presidential candidate. That being said; our choices in the 2012 national election have shaped up as a race between Barack Obama & Mitt Romney. Mitt not only has successful private sector experience; he has been a Governor. Being the Governor of a state historically has been better preparation for the white house than that of a senator. Governor responsibilities are the closest parallel to that of a president; but simply on a smaller scale. Not to mention; to be a conservative and navigate being a successful Governor in a state such as Massachusetts is no small achievement. The State of Massachusetts had  huge deficit and some trouble with unemployment. The state house was controlled by a body of 70% Democrats. Romney reached out to every one of them to understand their goals, find common ground and get things done. He reduced taxes; but did raise some state fees – the put more in the pockets of the middle class. He decreased spending and balanced their budget. Before taking office, the stat had debt, deficit spending and increasing unemployment. When he left office, Massachusetts had less taxes, more take home pay, lower unemployment, and a balanced budget with no more debt and massive multi-billion dollar rainy fund that would help the state in the event of an emergency.

With regard to other policies (foreign policy, upholding law, following the constitution); Obama has proven himself a dismal failure in just about every measure. So the choice this November is very clear.

What happened to the companies that went bankrupt, particularly the companies Bain Capital supposedly “looted”? How many jobs did Romney and Bain Capital destroy?

A Wall Street Journal article mentions four companies—American Pad & Paper (Ampad), Dade Behring, DDI, and Stage Stores—that Bain Capital made very profitable investments in and took money out of; later, the companies went bankrupt. What the article does not tell you is what happened before and after those bankruptcies. When you add it all up today, even in these investments, it looks likely that Bain Capital created jobs overall.

Bain Capital invested in Stage Stores in 1988, when the company was young. Stage went public in 1996 with 9,606 employees. Bain realized $184 million from the investment, then reinvested $23 million for a net payout of $161 million. Employment expanded to 15,700 employees by 1999. The company was hurt by the early 2000 recession and went into chapter 11 bankruptcy in 2000. Employment dropped back to 9,800 in 2001. Subsequently, Stage left chapter 11 and today it employs 13,500 people. So, even at its lowest point, Stage Stores had more employees than when it went public. Today, Stage has roughly 3,900 more employees than it did in 1996.

When you combine the increase at Stage and the decreases at the other three companies, you end up with a net increase in jobs of 1,100. So, even if Ampad suffered another 1,000 job losses in its break up (another 25 percent or larger decline), Bain Capital ultimately shows that these four investments led to a net increase in jobs.

And, when you combine the $6 billion that Dade Behring received from Siemens with any valuation for the other three companies—even zero—it seems likely that Bain would have been better off holding on to its investments rather than cashing out.

In summary – whether it is a struggling company that was taken over by Bain and then re-tooled to be successful, or investing in the expansion of an already successful company, or taking a company that has been improved upon by Bain and then sold to other investors – Bain is a huge success story. Any and all investments into companies by firms such as Bain Capital have a certain amount of risk. It is not going to be a success every time. We have to examine the entire history of Bain Capital and not just one or two companies that may have struggled or closed. Net-Net; Bain has provided good jobs in many different industries for thousands of workers. These are the simple and plain facts!

Additionally, Bain Capitals reputation for success has been so stellar that many organizations that are bastions of progressive liberalism have entrusted their investment portfolios and their employee retirement portfolios to Bain Capital. When it comes to these organizations making a decision of where to entrust the management of their investments; they have not make that choice based on ideology – they have made that choice based on the proven track record of Bain Capital – they knew that Bain Capital is less risky and can be trusted.

For an amazing list of municipalities, unions and other progressive liberal organizations that use Bain Capital to manage their investments – follow this link.

While we will probably never be able to measure all of the numbers related to Bain. That being said, it seems pretty clear that “looting” is an inaccurate description of what happened with these companies.


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