Bill Bain, the well-known management consultant and early Mitt Romney mentor who died this week, helped secure the Republican presidential candidate’s legacy — albeit not under the best circumstance.
In 1990, Bain’s 17-year-old consultancy, Bain & Co., was struggling and seemingly headed toward bankruptcy when Romney, a rising star at the firm’s private equity arm, was asked to step in and help save the firm.
Romney agreed — but wanted a steep price for his help.
The then 43-year-old investor said he would do it only if the firm gave him 100 percent ownership of Bain Capital, its small and struggling six-year-old private equity firm.
Desperate to save Bain & Co., management agreed to the deal.
Romney would indeed save Bain & Co. — but his legacy was cemented when he helped turn Bain Capital, which raised $37 million for its funds in 1984, into the juggernaut it is today, with assets under management of $75 billion.
“That $37 million was one of the largest first-time private equity funds ever raised, even though it seems like an insignificant amount of money today,” Geoffrey Rehnert, one of Bain Capital’s founding partners, told this reporter in a 2007 interview.
Bain, in one of its first leveraged buyouts — a $2.6 million 1986 investment in wheel-maker Accuride — was forced to bring in co-investors.
“Pete Peterson and Steve Schwarzman personally invested in Accuride, one of our first big deals at Bain Capital, and made 24 times their money,” Rehnert said, giving them the track record to later form The Blackstone Group and raise their own funds.
By 1998, Boston-based Bain Capital raised $1.4 billion, charging a 30 percent cut on profits, a carry, and a roughly 2 percent management fee.
Romney made fortunes that would give him the financial independence to run for the Massachusetts statehouse and then twice for president without much outside financial assistance.
It may have never happened if Romney had not made the gutsy demand in 1990 — and if Bill Bain and other executives had not agreed to it.