Tuesday, August 2, 2011

ROMNEY: Leveraged Buyouts and The United States

Hi All
The more I have thought about Mitt Romney's background with Bain, the more persuaded I am that that background is an absolutely perfect fit for the economic problems we are in today. far from " apologizing " for his acquired wealth at Bain, Mitt should integrate the entire career into a narrative about how to fix the country. let's start by looking at a LBO , a leveraged buy out by a financial investor like Bain:

First, Bain is on the lookout for underperforming companies whose assets are undervalued and whose financial results are underwhelming. More often than not, these companies are suffering from poor management whose objectives are often at a divergence with the interests of its shareholders. Perhaps , the company is burdened with entitlements like healthcare costs, excessive pension commitments or excessive executive payment unconnected to company results. Whatever the reason, Bain would borrow money, use some of its own resources and buy control of the company. Then, fire the management , rework and restructure the company, recruit new management, cut costs, etc. and eventually leave the company for a sizable return.

Now.........the United States is that type of company, large to be sure, whose management interests are not in sync with its stakeholders and investors........the U.S voters and taxpayers. Romney sees an America that can be, not what is. His career has been based on seeing what companies " can be " not what they are. What better option do we have than to put a guy into the CEO position of this big company to restructure it, rework its organization, cut costs, reallocate its resources and in 4 or 8 years, leave the company ( the U.S ) far better off than what he found. This is what guys like Romney do with LBO takeovers . If he has a lot of money....it's because he knows what he is doping. Otherwise, he'd be broke and not running for anything

Perfect fit


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Anonymous said...

Craig, I enjoy your posts, and learn a lot from you. I hope you keep at it.

I agree, Romney is a perfect fit. He's certainly the right man for the time.


Anonymous said...

amen! mitt 2012!

Anonymous said...

Your thought process is good, but the problem is that many of the "stockholders" really aren't getting such a bad deal. The median income in the United States is around $40,000 a year. Most people making that much money pay no taxes. Many of them are smart enough to recognize that high taxes on others are still killing the economy and affecting their quality of life. The stupid ones don't care. The stupid ones just blow off the idea of more debt by believing that only the rich people will be stuck paying for that debt. For them, the Democrat plans are fine. They see themselves receiving some benefits and all of the costs falling on others.

In many ways, this situation is what Mr. Romney tried to address with the health insurance mandate in Massachusetts. He wanted everyone to have a financial stake in keeping costs low. He didn't want anyone to be a free rider. If he can do things to eliminate free riders one the federal government or make them realize that high government spending is hurting them as well, we might finally get some real change in this country.

craigs said...

You are right. So, part of the U.S " makeover" has to be an entirely new tax code that replaces the 77,000 pages of arcane tax breaks with a Fair tax or 10 page tax codes with the requirement that everybody and every company pays SOME tax on real income. No more Free Riders like GE. Everybodyhas a " Stake". That's why we are all called " stakeholders."


Doug NYC GOP said...

Good post Craig!

I like the matching of Romney's experience to the country's problems. That seems to get lost in all the "conservative purity/revolution sauce."

This election in 2012 is about correcting a bad situation. We need a solid conservative, who is pragmatic and competent to solve problems.

The revolutionaries and barbarians belong in the House, that's the nation's traditional place for them.

BOSMAN said...


Perfect analysis of one of Romney's skill set. After teading this, can there be any other choice?

Romney 2012!

Revolution 2012 said...

Excellent analysis Craig.

Anonymous said...

Great post Craig, you've eloquently described my favorite talking point regarding mitt for president: "The country's most desperate need is also Obama's most damning weakness and Mitt Romney's greatest strength."

Well done!