Are private-equity firms job-destroying monsters? Or are they knights in shining armor, riding in to fix troubled companies and make the economy work better?
The Internet was taken aback when we learned now much (and how fast) Romney made money in 2010. Bain Capital, a private equity firm, is the source of Romney’s wealth. However, I was never quite sure of the logistics of the private equity business and was thus utterly enthralled by this week’s Planet Money podcast. The podcast brings us a story of a company that failed under Bain Capital and this complimentary blog post offers a success story.
It’s absolutely fascinating how private equity firms make their money from “flipping” corporations the same way one might flip a house. It’s also extremely difficult to quality this type of work: if the deal fails, there are quantifiable figures of jobs and money loss. Yet if the deal succeeds, the company’s impact on the economy, in terms of jobs and impact on surrounding businesses and jobs, is nearly impossible to measure.
The value of corporations such as Bain Capital remains in the realm of personal opinion. Albeit extremely strong opinions, with millions of dollars and hundreds of thousands of jobs on the line.