Romney's Profit from Bain's Buyouts: Up to $20,000 Per Laid-off Worker

Mitt Romney moneyBy Lauren Bloom

As the 2012 presidential campaign season swings into high gear, we're going to hear a lot about presumptive Republican nominee Mitt Romney's record on job creation.

Between his tenure at Bain Capital and his time as governor of Massachusetts, there'll be plenty for politicians and pundits alike to discuss.

Here are some of the highlights we can expect to hear from the campaign trail:

Bain Capital: The Good, the Bad and the Hard-to-Quantify.

Mitt Romney moneyIn 1984, Romney left management consulting firm Bain & Company to co-found the spinoff private-equity investment firm, Bain Capital. For the next 15 years, Romney presided over Bain Capital's operations, which shifted focus over time from venture capitalism to leveraged buyouts. Make no mistake about it -- Bain Capital's purpose was to make money for its investors, and it did so hand over fist. From its 1986 success investing in what was then a small office supply store called Staples (Romney fondly recalls stocking store shelves himself) until Romney left in 1999, Bain made billions. Along the way, it purchased at least five companies that subsequently ended up in bankruptcy even as Bain walked away with eye-popping profits:

• American Pad & Paper: Bain invested $5 million in the small paper company in 1992, and reportedly collected $100 million in dividends on that investment. AMPAD went bankrupt in 2000, laying off 385 employees.

• Dade Behring: Bain Capital invested $415 million in a leveraged buyout in 1994, borrowed an additional $421 million, and ultimately walked away with $1.78 billion. Dade filed for bankruptcy in 2002, and 2,000 workers lost their jobs.

• DDI Corporation
: Bain Capital reportedly invested $46.3 million in 1997, reaping $85.5 million in profits and an additional $10 million in management fees. When the company later went bankrupt, 2,100 workers were laid off.

• GS International: In a somewhat less profitable transaction, Bain Capital invested $60 million in 1993 and received $65 million in dividends. This company, too, went bankrupt in 2002, and 750 workers lost their jobs.

• Stage Stores: Bain invested $5 million to purchase the company and took it public in the mid-'90s, reaping $100 million from stock offerings. Stage filed for bankruptcy in 2000, and 5,795 workers reportedly were laid off.

William Bain Jr. (right) and Mitt Romney, at Bain's offices in Copley Plaza. The Boston Globe, Getty


Romney himself profited handsomely from his time running Bain Capital. Although the exact details of his personal finances are not available, news reports estimate his net worth at somewhere between $190 and $250 million, much of it derived from his Bain Capital days. Very rough math might suggest that Romney made as much as $20,000 per job lost.
In fairness to Romney, however, Bain Capital purchased more than 115 companies during his tenure, and Staples wasn't its only success. The Romney campaign points to household-name companies like Domino's Pizza and Sports Authority to support its claim that Bain Capital actually created approximately 120,000 jobs during the Romney era. But that number may also be misleading: Job creation at successful companies is usually more attributable to dedicated management than to investors or consultants.

Romney's job as head of Bain Capital was to make a handsome return for investors. His goal would have been to maximize efficiency and profits, not to ensure that people with steady jobs got to keep them. Consequently, although jobs were created, it's not clear how much of the credit should go to Bain and Romney.

Mitt Romney of Bain & Company waves after announcing his candidacy for a U.S. Senate seat in 1994. AP

The Massachusetts Miracle – or Not.

Romney proudly attempts to tout his success at creating jobs in Massachusetts, but the facts may not support him. According to MarketWatch, Massachusetts ranked 50th out of the 50 states in job growth during Romney's first year in office, and things improved very little thereafter. By the end of his term, Massachusetts was still 47th, ranking above only rustbelt states Michigan and Ohio and Hurricane Katrina-wracked Louisiana. While jobs were growing nationwide at more than 5%, Massachusetts limped along at a bare 0.9% growth rate. So yes, some jobs were created in Massachusetts during Romney's tenure, but not at a rate that unemployed American voters are likely to find reassuring.

So, who is the real Mitt Romney? It's clear that Romney will continue to portray himself as a savvy businessman who can put America back to work, and that President Obama will want to characterize him as a heartless corporate pirate who got filthy rich on other people's misery. The truth undoubtedly lies somewhere in between, but Romney's tendency to publicly stumble over his own wealth won't help him in the polls. The Internet is already full of awkward Romney quotes like:

• "Corporations are people, my friend."

• "I like being able to fire people."

• "I'm not concerned about the very poor."

All of those quotes have been taken out of context and stripped of whatever nuance Romney intended. Taken together, though, they form a fairly compelling -- if not necessarily accurate -- picture of a man with far more money than heart.

Do you plan to vote for Mitt Romney?
Yes2140 (20.0%)
No8131 (76.1%)
Undecided420 (3.9%)
And why should investors care? If corporate America likes Romney's promise of a business-friendly White House, there should be plenty of concern about how Romney's job creation record plays on the campaign trail. Corporations may be able to donate big money to presidential candidates these days, but it's still individual human voters who'll decide whether to vote Romney in or not.

Perhaps, instead of essentially promising to create jobs himself, Romney should focus his message on how making companies profitable and encouraging economic growth will create the need for well-paid workers. It's an honest message, and one that might just appeal to voters. If Romney gets mired in his arguably ambiguous record, or continues to arm his critics with quotes suggesting that he's just too rich to care about ordinary Americans, President Obama is almost certain to win another four years in the White House.


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Frank Bolin

Ole butcher mitt calling corporations people? May be but, it is known fact the neo con and ultra con supported newly formed republican voting block who now pour billions of their corporate government welfare, subsides and hidden monies in other countries called, CITIZENS UNITED may be citizens but, they are not all American Citizens nor live here. Another point I can prove is that of a couple of definitions in the American Dictionary with Democracy, Democrat, Liberty, Liberal and then Republic that being any government other than a monarchy. NO? What the communist republics such as China, Vietnam and scores of other republics?

July 12 2012 at 11:48 AM Report abuse +1 rate up rate down Reply
taxmom

Another dumb article. Does anyone understand that the jobs that are being discussed were at companies that were in financial problems when Bain stepped in, and 100% of the jobs would have been gone if no one put any money in the company.
Daily Finance, you put such a spin on your articles. No common sense, or logicaly thought

July 12 2012 at 10:56 AM Report abuse -1 rate up rate down Reply
STEVE

long term statistics show that the economy is usually better with democrat president than with republican
president . This is logical since the democrats try to help poor & middle class , who spend most of their
money , while republicans try to help the rich , who don't need it , so it's a waste.
Also, the republicans have caused the big deficits with tax cuts to the rich.

June 26 2012 at 12:43 AM Report abuse +1 rate up rate down Reply
chris1011

Your biggest problem righties is that Americans see Romney as a phoney. Read it and weep suckers: http://blogs.wsj.com/washwire/2012/06/20/poll-shows-obama-with-big-national-lead/

June 20 2012 at 4:06 PM Report abuse +2 rate up rate down Reply
1 reply to chris1011's comment
Frank Bolin

Karl rove has his hands full since his master guru Mike Connel who master minded the butterflies in Fla. and the Glitches in Ohio elections of 2000-04 that felt the heat of the whipping boy and was ready to turn states evidence as to facts but, he crashed his plane on a solo flight and never got there. Now the stooges must resort to controlling the states by republican governors and disinfranchising, confusing, threatening legal voters and complicating voter lines.

July 12 2012 at 11:56 AM Report abuse rate up rate down Reply
parthenon1

This all is so much BS. No one has even thought purposely or not how to quantify the jobs that were lost from the breaking up of a company that followed to the company that bought a part of the company. Also keep in mind if Bain invests an amount of money in purchasing a company but is unable to change the bad management team that brought them to needing some one like Bain or is unable to get the proven changes needed in the company then they cant be fixed so breaking up bad companies and intergrating the parts into successful companies then the company would go into bankruptcy any way. Profit are not a bad word it provides the jobs that comes from growing a good company, while lack of profit makes it a bad company for management and labor and needs to be gone. A corporation is not a charity it must make profit. Also Romneys family had great wealth but as Mormons his father gave to charity most of his money and only provided a good education and a small start up fund the rest he earned by hard work and putting his education and own intelligence to work.

June 20 2012 at 1:05 PM Report abuse -1 rate up rate down Reply
1 reply to parthenon1's comment
Frank Bolin

Seen the movie as lately named The 19 wife about mormans?

July 12 2012 at 11:04 AM Report abuse rate up rate down Reply
craigmrfrn

Romney was born with a silver spoon in his mouth. Any one of us could do what he does. He was handed his opportunity due to this. He has never felt the pain of the working man. The same goes for Donald Trump. A huge looser. Born into money, he's filed bankruptcy at least once, bullies people, picks fights with celebrities. If a wealthy person is going to run this country, let it be a self made person, not a spoiled brat.

June 20 2012 at 11:02 AM Report abuse +3 rate up rate down Reply
Robin Osgood

Romney says he will make us competitive by lowering the corporate tax rate to 28%. The problem with that is Canada's is 12% and Ireland's is 14%. Both of these countries we have lost high tech, high paying jobs to. So Mr. Romney how will your proposed tax rate make us competitive again?

Just as history has taught us, business men make very bad presidents.

June 20 2012 at 8:59 AM Report abuse +3 rate up rate down Reply
Somey

Mitt Romney is no friend of the middle class

June 19 2012 at 5:09 PM Report abuse +4 rate up rate down Reply
1 reply to Somey's comment
Frank Bolin

Also, mitt the butcher would try to finish what gwbush tried to do when he said, It is time to fix SSI and invest it in the stock market. Mind you this was not long before later American taxpayers had to bail out the corruptions of stock market and insurance companies. Anyone see or recall the famous movie with Richard Gere called Pretty Woman? Gere played to butcher that mitt romney in real life is by hostile corporate take overs swallowing up historic family and employee owned business in difficult times.

July 12 2012 at 11:37 AM Report abuse rate up rate down Reply
Somey

imalibnow2

You know nothing, chris.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++AnAnd what do you know?

June 19 2012 at 5:05 PM Report abuse +1 rate up rate down Reply
chris1011

The insideous fact is, the Republican leadership swore an oath to impede all legislation, to deny Obama the passage of any bills, any victories. The Repubs have brought our government to a near dead halt for 3 years. In 2010 election campaigns, the Boehner club promised to bring back the jobs if we would let them have the house. They won the house, and the Repubs have proposed nothing for new jobs, except more tax cuts. Even Robme has proposed nothing concrete, as if just his presence in the White House will bring on the jobs. They people swore allegiance to Norquist, placing him above the nation and violating their oaths of office. Their actions in this presidency have been treasonous.

June 19 2012 at 5:01 PM Report abuse +4 rate up rate down Reply