4 ms·

Every Guitar Center I've visited in the last year or two had that 'going out of business' feel. Not surprised to find out Bain Capital was involved.

Scoundreller 6y ago
Real question is how much value they stripped out before they filed.
- jeffbee 6y ago
  All of it, essentially. The company lent Bain the money needed to acquire itself, Bain didn't bring capital to the deal. Then, over the course of 13 years, the company paid Bain hundreds of millions of dollars in management fees, in cash. So Bain already got paid. They got hard money for driving the company straight into the ground.
  - AtlasBarfed 6y ago
    Sounds like Sears
    - jeffbee 6y ago
      Well, the guy who bought Sears did it the other way around, lending Sears a lot of money on secured loans and taking the interest out, as well as taking out cash through stock buybacks. But the process is similar: gain a majority stake in a company by whatever means are available, appoint yourself as the chief executive, and manage the company with the goal of enriching yourself, rather than with growing the company. The structure of the Sears deal was really interesting and suspicious. Sears bought a small number of Kmart stores for an enormous cash price, which sent Kmart stock into orbit, then Lampert used the inflated Kmart stock to acquire Sears. Pretty shady. Another difference is Lampert is a black sheep, but Mitt Romney is for some reason still socially accepted despite having wrecked dozens of American companies.
      - acomjean 6y ago
        Mitt ended up Governor of my state (Massachusetts). He did ok as Governor and oddly got us universal health care, which the federal Affordable Cares Act is based on, which I guess made him more palatable. Our democratic governor Deval Patrick went to work for Bain after he left office.
      - alisonkisk 6y ago
        Mitt Romney is Republican Governor and Senator. Fleecing America is how they build credibility. See also Rick Scott, who perpetrated a billion dollar Medicare fruad on his way to the governorship and Senate, and Kelly Loeffler whose husband bought her a Senate senate as a gift, which she used for insider trading and market manipulation on COVID-19.
      - lotsofpulp 6y ago
        I would like to see evidence that Lampert actually made a decent return on Sears. Seems like he would have done much better for a lot less work buying VOO.
  - richardwhiuk 6y ago
    "The company lent Bain the money needed to acquire itself" How does this work exactly? Why would the company lend an acquirer money?
    - freeone3000 6y ago
      They had a controlling interest in the company. Guitar Center voted to give Bain Capital money by one person wearing two hats.
      - lotsofpulp 6y ago
        Where did guitar center get this money to give Bain?
        freeone3000 6y ago
        They took out loans against their equity.
    - bena 6y ago
      It's a little more complicated than that. Bain Capital and other vulture capitalists aren't the ones being lent the money. They find a public company that's not doing great. Maybe they're just stagnant or they had a down year. Either way, you find someone who wants to sell a publicly traded company. Then they put up a small amount and have the company itself take out a loan to buy back its stock. So now the company is paying interest on the debt it took on to buy itself and also paying "management consulting fees" to places like Bain Capital. In short: Toys R Us should have never had to close its doors. https://theweek.com/articles/761124/how-vulture-capitalists-ate-toys-r https://theweek.com/articles/761124/how-vulture-capitalists-...
      - lotsofpulp 6y ago
        Who is lending money to a business so the business can pay its owner?
Rapzid 6y ago
I worked at a company that Bain bought and improved in many ways. They don't gut and run every company into the ground. Probably just the ones where that's the best upside they can work out of it.
- hakfoo 6y ago
  That feels like there's room for a deep dive, considering they've developed such a reputation for doing it. * Are their success stories quiet and their failures heavily publicised? * Are they not as creative/clever at strategy as they could be, resulting in them exhausting options and going for "run into the ground" too early or too frequently? * Do they pick an unusually large number of unhealthy firms that are prone to this endgame? In which case, why aren't they getting better at due diligence?

Scoundreller 6y ago

Real question is how much value they stripped out before they filed.

jeffbee 6y ago
All of it, essentially. The company lent Bain the money needed to acquire itself, Bain didn't bring capital to the deal. Then, over the course of 13 years, the company paid Bain hundreds of millions of dollars in management fees, in cash. So Bain already got paid. They got hard money for driving the company straight into the ground.
- AtlasBarfed 6y ago
  Sounds like Sears
  - jeffbee 6y ago
    Well, the guy who bought Sears did it the other way around, lending Sears a lot of money on secured loans and taking the interest out, as well as taking out cash through stock buybacks. But the process is similar: gain a majority stake in a company by whatever means are available, appoint yourself as the chief executive, and manage the company with the goal of enriching yourself, rather than with growing the company. The structure of the Sears deal was really interesting and suspicious. Sears bought a small number of Kmart stores for an enormous cash price, which sent Kmart stock into orbit, then Lampert used the inflated Kmart stock to acquire Sears. Pretty shady. Another difference is Lampert is a black sheep, but Mitt Romney is for some reason still socially accepted despite having wrecked dozens of American companies.
    - acomjean 6y ago
      Mitt ended up Governor of my state (Massachusetts). He did ok as Governor and oddly got us universal health care, which the federal Affordable Cares Act is based on, which I guess made him more palatable. Our democratic governor Deval Patrick went to work for Bain after he left office.
    - alisonkisk 6y ago
      Mitt Romney is Republican Governor and Senator. Fleecing America is how they build credibility. See also Rick Scott, who perpetrated a billion dollar Medicare fruad on his way to the governorship and Senate, and Kelly Loeffler whose husband bought her a Senate senate as a gift, which she used for insider trading and market manipulation on COVID-19.
    - lotsofpulp 6y ago
      I would like to see evidence that Lampert actually made a decent return on Sears. Seems like he would have done much better for a lot less work buying VOO.
- richardwhiuk 6y ago
  "The company lent Bain the money needed to acquire itself" How does this work exactly? Why would the company lend an acquirer money?
  - freeone3000 6y ago
    They had a controlling interest in the company. Guitar Center voted to give Bain Capital money by one person wearing two hats.
    - lotsofpulp 6y ago
      Where did guitar center get this money to give Bain?
      - freeone3000 6y ago
        They took out loans against their equity.
  - bena 6y ago
    It's a little more complicated than that. Bain Capital and other vulture capitalists aren't the ones being lent the money. They find a public company that's not doing great. Maybe they're just stagnant or they had a down year. Either way, you find someone who wants to sell a publicly traded company. Then they put up a small amount and have the company itself take out a loan to buy back its stock. So now the company is paying interest on the debt it took on to buy itself and also paying "management consulting fees" to places like Bain Capital. In short: Toys R Us should have never had to close its doors. https://theweek.com/articles/761124/how-vulture-capitalists-ate-toys-r https://theweek.com/articles/761124/how-vulture-capitalists-...
    - lotsofpulp 6y ago
      Who is lending money to a business so the business can pay its owner?

Rapzid 6y ago

I worked at a company that Bain bought and improved in many ways. They don't gut and run every company into the ground. Probably just the ones where that's the best upside they can work out of it.

hakfoo 6y ago
That feels like there's room for a deep dive, considering they've developed such a reputation for doing it. * Are their success stories quiet and their failures heavily publicised? * Are they not as creative/clever at strategy as they could be, resulting in them exhausting options and going for "run into the ground" too early or too frequently? * Do they pick an unusually large number of unhealthy firms that are prone to this endgame? In which case, why aren't they getting better at due diligence?