Bloody Leveraged Buyouts: Then And Now
Willard Romney, Bain Capital and the Vikings are related by philosophy, history and the blood on their hands. Romney and Bain consider themselves to be free-market capitalists. So did the Vikings, and each of the three made alot of money. While the Vikings murdered, raped and pillaged their way to success, Romney and Bain have pursued their fortunes in a more socially acceptable fashion. Make no mistake, they are all bound together by a business model created by the Vikings. Some would call them 'brothers from other mothers' and the brotherhood is real.
Those Middle Ages, free-market Viking capitalists with the big ships and long swords deserve most of the credit for the business plan that was used by Romney and Bain Capital to amass a fortune for themselves and, on a lesser scale, their investors. Much of Willard and Bain's success has come from a financial tool called the leveraged buyout.
A comparison of the two methods, first the old and then the modern, have some eerie similarities.
The Vikings' concept of a leveraged buyout was simple (simpler times):
•The Vikings would search out villages, some small, some big. The villages or towns were doing fairly well, had resources or something of value and in the early morning hours, the Vikings would swoop in and attack. They murdered the men in their sleep and then raped and killed the women. Most of the time they killed the babies, too, but many times, they kidnapped older children so they could turn them into slaves. Then the Vikings would take anything of value, leave the village in flames and be on their merry way with the spoils (profit).
One of the Vikings was SO well-versed in the art of the leveraged buyout that he eventually became the King of England! The Viking king's name was Knut the Great and even though he was more well known for slicing open the heads of his enemies with an axe than with a sword, he became a King! While Knut the Great was not the first of the Vikings to employ the successful model of leveraged buyouts, he was the best, in my opinion! He became a very powerful king and along the way, he stopped killing everyone, because, after all, he required a peasant population to work and produce more profit for him and his kingdom.
Gnut evolved into a brute that only killed those who needed to be killed and he gave tons and tons of the gold he had stolen to the churches. Although he never called it tithing, the gold-giving kept the churches on his side. What a smarty pants (politician) he was! Arguably, he could have gone to Harvard and gotten a couple of degrees...A full 99% of his subjects were poor because Gnut the Great took everything of value, but with churches on his side (while sharing in the loot), what could those subjects do?
Willard the Bain's leveraged buyouts are not quite as brutal as the Vikings. In fact, they seem boring by comparison. So boring, that very few people even understand what happens with a modern leveraged buyout, but minus the killing and raping, there is plenty of slashing, burning and looting. The fun stuff still plays a role.
Willard the Bain's concept of the leveraged buyout might seem, on its face, to be complicated (times are not so simple now). Just keep in mind the business model of the Vikings, and you will have no trouble with the plan that made Willard the Bain so wealthy:
•Willard the Bain doesn't use the term leveraged buyout too much. Instead, you will hear the phrase, private equity (but they are basically the same). Private equity deals focus on debt-heavy leveraged buyouts of slightly troubled companies that have some wealth or resources that can be used as collateral for borrowing. The first thing Willard the Bain did was swoop in, usually while everyone was asleep, and start to restructure by cutting costs and eliminating jobs. Restructuring and cutting jobs tends to make a company appear financially healthy enough to borrow money on its collateral (wealth and resources) and that borrowed money went to pay off Willard the Bain's investors, principles and of course, Willard the Bain. Then, when the leveraged companies had serious financial troubles (who coulda predicted that?), Willard the Bain would file bankruptcy for the company and run away with the spoils (profits), leaving the company in flames and the workers unemployed.
See how simple that is?
Willard The Bain's Record
The Wall Street Journal took a close look at Willard the Bain's top 77 deals and found out that those deals made "the Bain" most of his well over $200 Million dollars. The companies? The companies didn't do so well.
The Journal pointed out that within 8 years of Willard the Bain's leveraged buyouts, 22 percent of the companies filed for bankruptcy or closed their doors. Another 8 percent were so bad off that Willard the Bain lost his company's investment.
There were also those companies where the pension funds were looted... It's all good, though, because the taxpayers picked up the cost. Pension plans were never a big part of the Viking business model, anyway, so I hesitate to even talk about them. Maybe next time...
Some have called Willard the Bain a vulture capitalist. I prefer to call him a Viking, and much like Gnut the Great, Willard the Bain wants to be King! He may wear a suit, but he carries a long sword, maybe even an axe, and just like Gnut the Great, Willard the Bain's subjects will be poor because he and his comrades will slash, burn and loot. It is what he knows!
Ooops, almost forgot! Willard the Bain will tithe...