Since emerging as the Republican front-runner, Mitt Romney has been pilloried as a corporate raider and greedy destroyer of working-class jobs because he once headed private equity firm Bain Capital.
A new video by a political action committee with ties to rival presidential candidate Newt Gingrich portrays Romney as someone who plundered companies for their assets, left them in debt and ruined countless lives of ordinary Americans.
That's not the view at Fort Wayne, Ind.-based Steel Dynamics (NASDAQ:STLD - News), where Bain invested just as the company was getting off the ground in 1994. Today, Steel Dynamics is the fifth-largest U.S. steel maker, employing 6,437 workers, according to Chairman and just-retired CEO Keith Busse.
That number includes about 4,000 new jobs, with the rest coming via acquisitions.
But it goes further than that, Busse says. For every steel worker directly employed, there are three or four jobs created by a network of suppliers. He estimates the total employment base as the result of Steel Dynamics' success at around 25,000.
"They were great to work with," Busse recalled of Bain. "They were good providers of financial knowledge. They put people into deals who were very savvy. They could tell you what to do and what not to do.
To this day, Bain managing director Paul Edgerley remains on Steel Dynamics' board, although Bain has long since sold its interest.
"We value Paul's advice," Busse said. "We've often asked ourselves what would we do if he left the board.
Steel Dynamics was founded by Busse and two other industry veterans in 1993 with plans for a plant in Butler, Ind. They were looking for venture capital to help them.
"It normally takes two years to make a steel plant profitable," Busse recalled. "We didn't have two years. We were running out of money.
Welch brought in Bain, which investigated the project. Busse said he met with Romney. Bain liked the deal and invested $18.3 million.
"Their general strategy is to exit early," Busse said. Bain later sold its stake for $104 million, according to a 2000 prospectus from Deutsche Bank.
The private equity firm should have held on longer. Steel Dynamics went public in November 1996, finishing its first month of trading with a split-adjusted price of 4.56 a share. The stock reached a peak of 40.92 in June 2008 for a gain of 797%.
Romney formed Bain Capital with a half-dozen other MBAs in 1984. As consultants with Bain & Co., they were frustrated that the companies that hired them wouldn't follow their advice. What better way to put a company on the path to prosperity than own the company, they thought.
Starting with just $37 million, the new firm provided venture capital money to young companies or took charge of distressed corporations and tried to turn them around.
"It's a risky strategy from the start because you're already dealing with distressed companies," an industry insider told IBD. "If you're successful in one out of 10 cases, you're doing quite well. The goal isn't to create jobs. It's to build a successful company. Ultimately, that translates into more jobs.
While Bain Capital lost its entire investment in some endeavors, it was spectacularly successful with others.
Romney likes to recount his investment in Staples (NASDAQ:SPLS - News) . In 1986, supermarket executive Thomas Stemberg wanted a business that would be an inexpensive one-stop center for office supplies.
Starting with an initial investment of $650,000 from Bain, Stemberg opened his first store in Brighton, Mass.
Romney served on the board of directors. Today, Staples promotes itself as the world's largest office-supply business with 90,000 employees in 26 countries.
In the early days, it was common for Bain partners to help run or even head companies in which they invested.
The firm's first investment was troubled Las Vegas-based Key Airlines. Coleman Andrews became CEO. A $2 million investment turned into $5.4 million when the airline was sold a few years later. The airline later filed for bankruptcy.
One of Bain's biggest successes in its early days was Accuride, the wheel-making unit of Firestone Tires. A $2.6 million investment grew to $61.2 million by the time the company was sold.