Romney was heavily recruited and, after graduation, chose to remain in Massachusetts and go to work for Boston Consulting Group (BCG), thinking that working as a management consultant to a variety of companies would prepare him for a future job as a chief executive. Romney's legal and business education proved valuable in this role, and he quickly became a rising star while applying BCG principles such as the growth-share matrix.
In 1977, he was hired away by Bain & Company, a hot new management consulting firm in Boston that had been formed a few years earlier by Bill Bain and other former BCG employees. Bain would later say of the thirty-year-old Romney, "He had the appearance of confidence of a guy who was maybe ten years older." With Bain & Company, Romney proved adept at learning the "Bain way", which consisted of immersing itself in each client's business, and not simply to issue recommendations, but to stay with the company until they were effectively changed for the better. With a record of success with clients such as the Monsanto Company, Outboard Marine Corporation, Burlington Industries, and Corning Incorporated, Romney became a vice president of the firm in 1978 and within a few years one of its best consultants. Romney became a firm believer in Bain's methods; he later said, "The idea that consultancies should not measure themselves by the thickness of their reports, or even the elegance of their writing, but rather by whether or not the report was effectively implemented was an inflection point in the history of consulting."
Romney was restless for a company of his own to run, and in 1983 Bill Bain offered him the chance to head a new venture that would buy into companies, have them benefit from Bain techniques, and then reap higher rewards than just consulting fees. Romney was initially cautious about accepting the offer, and Bain re-arranged the terms in a complicated partnership structure so that there was no financial or professional risk to Romney. Thus, in 1984, Romney left Bain & Company to co-found the spin-off private equity investment firm, Bain Capital. Bain and Romney spent a year raising the $37 million in investment money needed to start the new operation. As general partner of the new firm, Romney was frugal and cautious, spending little on office appearance and finding the weak spots in so many potential deals that by 1986, very few had been done. At first, Bain Capital focused on venture capital opportunities. Their first big success came with a 1986 investment to help start Staples Inc., after founder Thomas G. Stemberg convinced Romney of the market size for office supplies; Bain Capital eventually reaped a nearly sevenfold return on its investment.
Romney soon switched Bain Capital's focus from startups to the relatively new business of leveraged buyouts: buying existing firms with money mostly borrowed against their assets, partnering with existing management to apply the "Bain way" to their operations (rather than the hostile takeovers practiced in other leverage buyout scenarios), and then selling them off in a few years. Bain Capital lost most of its money in many of its early leveraged buyouts, but then started finding successes with spectacular returns. Indeed, during the 14 years Romney headed the company, Bain Capital's average annual internal rate of return on realized investments was 113 percent. Romney excelled at presenting and selling the deals the company made. The firm initially gave a cut of its profits to Bain & Company, but Romney later persuaded Bain to give that up.
The firm successfully invested in or acquired many well-known companies such as Accuride, Brookstone, Domino's Pizza, Sealy Corporation, Sports Authority, and Artisan Entertainment, as well as lesser-known companies in the industrial and medical sectors. Romney's cautious instincts were still in force at times; he wanted to drop a Bain Capital hedge fund that initially lost money, but other partners prevailed and it eventually gained billions. He also personally opted out of the Artisan Entertainment deal, not wanting to profit from a studio that produced R-rated films. Romney was on the board of directors of Damon Corporation, a medical testing company later found guilty of defrauding the government; Bain Capital tripled its investment before selling off the company, with the fraud being discovered by the new owners (Romney was never implicated).
Leveraged buyouts such as those Bain Capital did sometimes led to layoffs. Of these, Romney later said, "Sometimes the medicine is a little bitter but it is necessary to save the life of the patient. My job was to try and make the enterprise successful, and in my view the best security a family can have is that the business they work for is strong." Bain Capital's acquisition of Ampad exemplified a deal where it profited handsomely from early payments and management fees, even though the subject company itself ended up going into bankruptcy. Bain was among the private equity firms that took the most such fees, and more cases happened as Romney was leaving the firm. He said in retrospect, "It is one thing that if I had a chance to go back I would be more sensitive to. It is always a balance. Great care has got to be taken not to take a dividend or a distribution from a company that puts that company at risk. Taking a big payment from a company that later failed would make me sick, sick at heart.
In 1990, Romney was asked to return to Bain & Company, which was facing financial collapse. He was announced as its new CEO in January 1991 (but drew only a symbolic salary of one dollar). Romney managed an effort to restructure the firm's employee stock-ownership plan, real-estate deals and bank loans, while rallying the firm's thousand employees, imposing a new governing structure that included Bain and the other founding partners giving up control, and increasing fiscal transparency. Within about a year, he had led Bain & Company through a highly successful turnaround and returned the firm to profitability without further layoffs or partner defections. He turned Bain & Company over to new leadership and returned to Bain Capital in December 1992.
During his years in business, Romney tithed by giving millions of dollars to the LDS Church. He served as ward bishop for Belmont from 1984 to 1986, acting as the ecclesiastical and administrative head of his congregation. From 1986 to 1994 he presided over the Boston Stake, which included more than a dozen congregations in eastern Massachusetts.
Romney left Bain Capital in February 1999 to serve as the President and CEO of the 2002 Salt Lake City Olympic Games Organizing Committee. By that time, Bain Capital was on its way to being one of the top private equity firms in the nation, having increased its number of partners from 5 to 18, had 115 employees overall, and had $4 billion under its management. Bain Capital's approach of applying consulting expertise to the companies it invested in became widely copied within the private equity industry. His experience at Bain & Company and Bain Capital gave Romney a world view that was business oriented – centering around a hate of waste and inefficiency, and a love for data and charts and analysis and presentation, and a belief in keeping an open mind and seeking opposing points of view – that he would take with him to the public sector. As a result of his business career, by 2007 Romney and his wife had a net worth of between $190 and $250 million, most of it held in blind trusts. Although gone, Romney received a passive profit share as a retired partner in some Bain Capital entities. An additional blind trust existed in the name of the Romneys' children and grandchildren that was valued at between $70 and $100 million.
Family life of Mitt Romney,
Romney's 1994 U.S. senat ,
Electoral history of Mitt Romney
Tags:
No comments:
Post a Comment