Buyout Firms Campaign to Curb Fallout From Romney Private-Equity Bashing
The buyout industry, seeking to contain damage as Mitt Romney draws criticism over his role at Bain Capital LLC, plans to counter perceptions that firms profit at the expense of workers, according to a person familiar with the plans.
The Private Equity Growth Capital Council, the industry’s lobby group in Washington, is starting a web-based campaign at the end of the month aimed at political commentators with testimonials of people who say private equity has helped their business, said the person, who asked not to be named because the information isn’t yet public. Member firms, which include Blackstone Group (BX), Carlyle Group and KKR & Co., have been highlighting job creation in press releases.
“The worst images of private-equity firms are that they are job killers,” said Nela Richardson, a senior economic analyst for Bloomberg Government. “To turn this image around the private-equity industry must showcase their ability to transform insolvent and weak companies into job creators.”
The firms are pushing to limit the fallout from Romney’s bid to become the Republican candidate in this year’s presidential elections. Former U.S. House Speaker Newt Gingrich this weekend likened buyout firms to looters, the first time the field of a half-dozen contenders has taken aim on this issue at Romney, winner of the Jan. 3 Iowa caucuses and a favorite to win in New Hampshire.
The charges will be amplified in South Carolina, the next primary state, with a 30-minute, independently produced television advertisement bought by a political-action committee run by his former aides called “Winning Our Future” and funded by supporters, according to Rick Tyler, an adviser to the PAC and onetime Gingrich campaign spokesman. The trailer for the ad calls Romney a corporate raider and says he’s akin to others on Wall Street motivated primarily by greed.
A preview of the film, entitled “When Mitt Romney Came to Town,” juxtaposes images of Romney next to a corporate jet and his $12 million beach house in La Jolla, California, with vignettes of workers in Marion, Indiana, describing how they lost homes and livelihoods after Romney’s firm bought office supply products company Ampad Corp.
The private equity council has studied commercials used to disparage Romney in 1994 during his failed attempt to unseat then-Massachusetts senator Edward Kennedy. Kennedy supporters that year ran television ads that featured workers who had recently been fired from office supply manufacturer SCM Office Supplies Inc., after Bain-controlled Ampad bought it.
“He just wants to take money out of your pocket and put it in his,” says a person in one of the ads, who was portrayed as a recently-fired SCM employee.
Firms including Blackstone and KKR formed the council in 2007 after recognizing the importance of influencing policy in Washington as lawmakers proposed tax increases on private-equity managers. The industry has so far managed to avoid a higher tax on its profit-based compensation, so-called carried interest.
The council is also concerned about private equity being conflated with investment banks and other financial institutions that have come under criticism for doling out rich bonuses after receiving bailouts from U.S. taxpayers in the financial crisis. The council has been meeting with political commentators and pundits to explain the differences between private-equity firms, which take client cash and borrowed money to take companies private with the aim of selling them later for a profit, and the rest of Wall Street.
“There is a lot of misinformation being spread, purely for political purposes and on both sides of the aisle, as it pertains to private equity,” Steve Judge, the group’s interim president and chief executive officer, said in an e-mailed statement. “While the business model has evolved over time, the fact of the matter is private equity provides capital and operational expertise to companies that are often underperforming or on the brink of failure.”
One anti-Romney advocacy group, Americans United for Change, has sought to tie Romney to investment banking. It released a web-based advertisement titled “It’s Morning Again on Wall Street,” linking Romney and fictional movie character Gordon Gekko whose mantra was “greed is good” in the 1987 movie “Wall Street.” The ad is set in 2013.
“This year more investment bankers will take home billion- dollar bonuses than ever before in our nation’s history,” says the narrator. “This afternoon corporations will lay off thousands of employees so investment bankers at firms like Bain Capital and Gekko & Company can loot them.”
Buyout firms are trying to avoid the same taint the oil industry endured during former President George Bush’s election campaign in 2000 when his Democratic opponent Al Gore highlighted Bush’s cozy relationship with the oil and gas industry.
Even before the attacks against Romney, firms started to highlight their track record in creating jobs, a message that resonates with the public pension plans that are among the largest investors in private equity. Blackstone in October announced that one of its portfolio companies put 500 union workers back on the job when it opened an oil refinery that had been shut by the previous owner. Carlyle yesterday announced a deal to provide financing for the construction of a clean-energy project, a project that will create 400 jobs.
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