Private Equity Is not a Bad Thing

Much is being made of Mitt Romney’s tenure at Bain Capital. The narrative goes something along the lines of Mitt making millions while thousands of ordinary people lost their jobs. (Queue evil, cackling laughter.) While this narrative may play with those who are envious of the wealth or others and have no idea how to operate a business, I owe a big debt of gratitude to those who are willing to risk their money on companies in trouble. During my professional career I’ve worked for three tech companies. Two of those companies were bought by private equity firms while I worked for them. A third tried to find some private equity investors and was unsuccessful. The results?

Both companies that were acquired by private equity firms lived on to fight another day. Yes, it meant that some employees lost their jobs after the purchase was finalized (both times I kept mine) but the end result was that the companies were given a second chance to turn things around. I was actually very relieved when one of the companies was bought because it was bleeding money very fast. If the investment hadn’t occurred, the entire company would have closed its doors in a matter of months costing ten times as many employees their jobs. Of the two companies, one was eventually sold several years later at a loss. The other become leaner and meaner and, as of now, is doing quite well.

The tech company that was unable to find investors eventually shut its doors and laid off all its employees. An injection of capital would have not only stopped the company from closing but also injected much needed leadership that could have saved it, made it profitable, and brought on even more employees.

It’s easy to play Monday morning quarterback and criticize the decisions Romney or others at Bain made after buying different companies. But no one seems to be asking what would happen to those companies if Bain Capital or someone else hadn’t stepped in. Companies can only create jobs or hold on to existing ones if they’re making money. Companies that can’t make a profit eventually close their doors. This affects not the employees who worked for these companies but customers who use that product or service. (I say this as someone who drives a Saturn.)

Private equity companies do everyone a service by evaluating companies that are in trouble and deciding if they’re worth saving. Job losses often occur after any acquisition but pale in comparison to an entire company closing down. Bain Capital may have laid off employees but it seems that most of their investments have generated far more jobs than lost with many companies, like Staples, becoming phenomenally successful and employing thousands upon thousands of people.

I owe years of employment to those willing to inject capital into unprofitable or mismanaged companies. I tip my hat to the men and women willing to undertake that challenge. And I wouldn’t hesitate to vote for one as POTUS.