I’ve read about GOP presidential candidate Mitt Romney‘s flip-flops on important social issues like gay marriage and gun control. But it was more than a little amusing to see the businessman’s candidate squirming under questioning on a subject in which he is deeply knowledgeable: private equity.
In a front-page article Monday in The New York Times, Romney owns up to the fact that somtimes buyout firms need to fire people at the companies they buy. But listen to his backtracking:
“The experience of the last eight years, running the Olympics and being a governor, would make me take an even more sensitive look at the impact of business decisions on the lives of suppliers and employees and others who are involved,” he said.
Sure, Mitt. Or this, when asked about the practice of private-equity firms taking dividends out of acquired companies long before they are successful investments, and putting the companies more deeply in debt in the process:
“It is one thing that if I had a chance to go back I would be more sensitive to,” Mr. Romney said. “It is always a balance. Great care has got to be taken not to take a dividend or a distribution from a company that puts that company at risk.” He added that taking a big payment from a company that later failed “would make me sick, sick at heart.”
This is why buyout firms do best, of course: make money for themselves and their investors. That’s a story line that admittedly wouldn’t play well on the hustings.
Another fun nugget in the piece is the writer’s assertion that Romney likes to refer to Bain Capital, which he founded, as a “venture-capital” firm. (The journalist I like to call their David Kirkpatrick wrote the article; Here’s ours.) Bain Capital did start out doing VC investments, but it quickly became a buyout shop, which, like most others, stayed away from hostile deals. Romney understands the distinction and how it might play with voters. VCs build businesses; buyout guys strip assets and fire people. (It’s a point the VC crowd is making, as I wrote here, in trying to distance itself from a potential tax-code revision aimed at buyout firms.)
Incidentally, the article – essentially a political piece in the front section of the nation’s newspaper of record – raises the taxation issue by pointing out that dealmakers like Romney typically pay taxes at a lower rate on the majority of their income than most Americans. (A recent Go West post covers this topic in more depth.) Curiously, the article doesn’t say if Romney would support a move to raise taxes on VCs and the PE crowd. One thing seems likely: Whatever answer Romney gives might well be different than the one he would have given 10 years ago.
