Drip… drip… drip. That rabble-rousing socialist rag the Financial Times investigates, and discovers “an early deal by Bain Capital marked by unlawful suppression of a pilot’s union”:
The first leg of Mitt Romney’s journey to a private equity fortune ran between Nellis Air Force Base in Las Vegas and the Tonopah Test Range, deep in the Nevada desert.
In the mid-1980s Tonopah, also known as Area 52, was home to the newly developed, top secret F-117A stealth fighter. Pilots and support personnel lived in Las Vegas and spent their working week in the desert. A $10m-a-year contract to shuttle them back and forth was the prize asset of a small charter company called Key Airlines, which became a formative deal for Bain Capital, the private equity firm that Mr Romney cofounded, and where he built the career that is his main credential for the White House…
The tale of Key Airlines spans the creation of Bain Capital in 1984 – spun out from the Bain & Company management consultancy – and provides a glimpse of its methods and results. Key grew during its Bain years. Sales roughly doubled from 1983 to 1985 and employment more than doubled to about 200 jobs. Bain bought the company on the cheap, rode a turn in the industry cycle and then sold for a remarkable price.
A start-up pilots union was unlawfully suppressed, according to a federal court ruling. Some other methods foreshadowed the later success of Bain Capital: Key Airlines was an early example of a leveraged buyout. The initial deal was 100 per cent debt financed with no capital from the investors.
Bain also reshaped Key Airlines, turning it from a profitable, taxpaying company with a $13m balance sheet and its own aircraft, into an operating company with a $2m balance sheet and a holding company from which it sold assets separately….
Meanwhile, the Boston Globe discovers, today’s Bain Capital doesn’t play well with other corporate persons, either:
Bain is willing to participate in the public debate about its brand only to a point, however. Unlike some other leading firms, which are taking more active steps to buff private equity’s image, Bain has stuck largely to a defensive posture, believing the most prudent strategy is to respond to news stories as needed, correct the record when falsehoods surface, and provide talking points to employees and management teams at companies it controls. The firm remains averse to opening up with the press in a meaningful way. (After a month of negotiations, I was given almost nothing on the record from Bain’s managing directors.) Bain executives speak of keeping their heads down, with the expectation that, in the words of one, “this, too, shall pass.” Bain’s reluctance to engage more forcefully is a source of puzzlement among others in the industry….
As Above, So Below: Bain Capital, Freebooter & Free-RiderPost + Comments (35)