The Ledger
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Connaughton: Investment banks are probably the worst talent pool for PE
“And the rest of the industry was hiring from investment banks, which I think are principles at one level, but at the same time, they're really about getting fees for transactions, not for making returns on investment. So it's probably the worst possible place …”
Connaughton: Founder-dominated private equity firms generally fail after one generation
“Founder-oriented models, generally the ones that didn't survive more than A generation.”
Connaughton: Private partnerships retain talent better than public PE firms
“I think that in terms of attracting and retaining people, I think people who come to a firm where we have a hundred percent of our economics to invest in our people and our partnership versus having 50% of it gone forever, I think that's fundamentally more att…”
Environmental commodity markets will face shortages and price inflections by mid-2020s
“And in the window of time we're in now, sort of mid decade, 20 twenties, we are likely to be flipping into an environment where we're going to be in shortage of many of these instruments. And that's likely to cause a significant price inflection.”
Connaughton: Going public limits PE firms' ability to incentivize future partners
“If you're A company today that's given away half your equity, you can only give away your equity once. You can't actually give it away twice. And so right now, that's one of the reasons why our generations of partners that are leaders now stayed and are motiva…”
Connaughton: Scale correlates with lower returns, but is not causal
“There's this natural tendency to believe or feel like that scale is correlated with lower returns, and it is, by the way, but it doesn't mean it's causal, which is to say, if you can find the selective opportunities at scale where you can generate high perform…”
Private equity historically made most of its profits below 7x EBITDA
“First, it said that private equity had made the majority of its money in deals done at less than seven times EBITDA.”
Connaughton: Bain Capital generates average returns of 20% to 25%
“So think about low rates of 1920, and 21, where we raised the capital, and then think about Our average returns being 20 to 25%.”
Connaughton: Private equity narrative remains stuck on 'barbarians at the gate' stereotype
“I think the failures, look, we're 40 years in, the narrative for our industry is still pretty negative. It's not that far away from the barbarians at the gate stereotype that we've been living with from the start, and so I think that we need to turn that aroun…”
Campbell: Investors must be wary of unstructured voluntary carbon markets
“So what we have seen is a very, very disparate set of opportunities in the voluntary markets, many of which are interesting, but many of which are also not interesting, both as actually doing good in the world, as well as an investment opportunities. And like …”
Rees: Bain's $1B fund commitment sparked industry-wide GP skin-in-the-game standard
“In just shortly after the financial crisis, there were questions around skin in the game from the perspective of investors and investors were saying, yeah, your performance in the industry hasn't been that good through this cycle. And so how do I know you're i…”
Connaughton: 15% of all capital invested across Bain Capital is internal partner money
“15% of every dollar is our own capital, and that's multiplied by a very large dollar amount.”
Connaughton: Private equity's inefficiency is differential judgment of return prospects
“It's like there is an inefficiency, ultimately, that remains in our industry, not to get the highest price. They'll get that, but to have the Prospect of returns be judged differently by one sponsor versus another one strategic versus another.”
Connaughton: Bain Capital beats PE average by over 1,000 bps historically
“We've earned over a thousand basis points higher than The private equity mean during our history”
Connaughton: Expanding Decision-Making Committees Dilutes Accountability and Dialogue Quality
“Well, I think that there is this concept of adding additional voices and insights and perspectives to the room. It seems like it can only help. So having a larger and larger group of people providing input when they're really smart people, It seems intuitively…”
Connaughton: Quantitative factor analysis eliminated hedge fund arbitrage business models over time
“If you sort of think about all the arbitrage that was being taken out of the market by information and factor analysis and a lot of the quantitative public investors that are out there, that's not our style and certainly never was our style, but it was the sty…”
Insurance companies will become much larger private market allocators
“Insurance companies are going to be much bigger allocators. Lincoln recently partnered with Bain and Partners Group, these really strategic partnerships. They have hundreds of billions of dollars in the general account to invest into private markets and So the…”
Connaughton: Alternative asset management success depends 100% on talent
“It's a hundred percent people. Look, I do think the all asset space, there's a long time between when the active management public space went from being a really people driven business to becoming a more distribution business and more commoditized. I think in …”
Connaughton: Bain Capital Made 25x on Accuride Investment
“I think we bought Accuride. I think it was levered, 8515, or ninety-ten, and had five million of investment, and we made 25 times our money. And that's because we turned the business around, not because it was just financial engineering. We actually took a bus…”
Connaughton: Bain Capital started eight new businesses internally since 2015
“Starting businesses, we've started eight new businesses since 2015, and it's all with our people, and I think the opportunity to do that not by having a brand, And capital, but by having people who have decided they really wanted to really pursue an opportunit…”
Connaughton: PE leaders must remain active deal practitioners to maintain credibility
“We are an industry of practitioners who also need to take leadership roles, and I think that type of credibility of having people who have been doing deals making an impact in companies and then putting them in leadership, that's been part of how we've grown o…”
Connaughton: Bain turned a 0.65x marked-down fund into over 2x return
“We had 250 people. Two thirds of those people were working inside the companies and we call it getting across the icy river. We got across the icy river, which was probably in some ways we'll never get rewarded for it, but it was probably one of our finest mom…”
Connaughton: Promoting top dealmakers to leadership is a common PE firm mistake
“There are incredibly successful Dealmakers and portfolio folks would not be great leaders or don't want to be. And so I think that's a common mistake that firms make is they put their best dealmakers who don't either have the interest or capabilities leaders, …”
Connaughton: Bain chose democratic partner elections over autocratic control
“We wanted to create a form of governance that allowed for the broad number of partners that remained to elect the group that could lead, but they would be accountable to the broad partnership for that leadership. And that structure, I think, worked pretty well…”
Connaughton: Bain Capital generates a 1,000 basis point premium over public equities
“Our ability to generate consistent differentiated thousand basis points of premium over our public equity return reference points”
Connaughton: Bain Capital was first to recruit PE talent out of college
“Honestly, we were the first ones to really start recruiting right out of college or certainly right after a couple of years in their first job, and I think getting people in early to really get the mentorship and training From people more experienced over a lo…”
Connaughton: Winning top-price bids requires operational repositioning beyond seller forecasts
“The only reason you can do that is to create some form of inflection, some form of strategic repositioning, some form of asymmetric upside in the operating outcomes, some M&A. And so everything we do is to say, okay, we're going to buy a business based on what…”
Gordon: HCA buyout focused on tactical optimizations over transformative restructuring
“This actually wasn't a case where we had a lot of very transformative initiatives in mind. HCA was a well-run company, and so this was much more a story about just Really focusing on a longer list of tactical optimizations with the idea that driving that kind …”
Bain Capital Generated a 5x Multiple on 2006 HCA Mega-Buyout
“We ended up making about a five times multiple of money on that investment.”
Responding to M&A Rumors With Non-Denial Denials Only Fuels Speculation
“We don't engage in any misinformation or anything like that, so generally the best thing you can do is just sit quietly and let it go away on its own, because the more you're making awkwardly worded, non-denial denials, the more you're probably just be contrib…”
Bain Capital Hedged Over 95% of Variable Debt in Early 2021
“Back in early 21, when no one believed interest rates could ever go up, we actually put in place swaps and hedges to swap out over 95% of our variable rate interest exposure across our entire portfolio”
Gordon: HCA buyout sat at leading edge of pre-GFC take-private wave
“Shortly after HCA, as the debt markets heading right into the GFC got really hot, there was a period of time where lots of different public to privates could happen and frankly did happen, but HCA was really on the very, very front Edge of that, and maybe you …”
Campbell: Environmental markets lack institutional capital to reach fair value
“More recently, we've come across environmental markets in the last five years, which we think is another example of one of these nascent markets where there is not significant capital yet and move those markets to what we think is, is fair value as an example.”
Connaughton: Hitting 3x to 10x on one-third of investments drives outperformance
“If we could have 15 shots on goal to make three to, in some cases, 10 times our money, we won't do it every time. But if we do it a third of the time, then we're going to earn that thousand basis points premium.”
Connaughton: 80% of Bain Capital investment decks focus on strategy over financial models
“And even if you look at our investment decks, 80% of it is about market, company strategy, and implementation of our thesis. And it's not like, A lot of financial models.”
Connaughton: Buyer of choice status still requires paying the highest price
“Seller always gets the highest price available out there. There's this famous thing that Partners will always bring into the investment committee. It's like we're the buyer of choice. And by the way, I believe we are, but that plus a nickel more will get you t…”
Connaughton: 80% of Bain Capital staff have consulting and operating backgrounds
“I mean, I think that 80% of our people come from consulting and operating backgrounds. It's like the inverse of the rest of the industry, where 80% come from finance and investment backgrounds.”
Connaughton: Early Bain Capital targeted a 10x 5-year return (55.8% IRR)
“In fact, one of the big metrics that we all often sought was 10 times our money in five years, which is a 55.8% return, which was what we targeted.”
Connaughton: Bain shifted to larger deals to maximize talent ROI
“I think that evolution resulted in us all going to larger deals and deploying capital, and then our resources deployed against larger companies, because we put half our people more often in the companies on a day-to-day basis, and so having the ability to actu…”
Connaughton: Bain Capital manages $200B in assets across 13 strategies
“Over time we're a 180. We have two hundred billion of assets. We have 13 strategies.”
Connaughton: Bain Capital started with VC and growth equity, not institutions
“We didn't have LPs that were institutional. We didn't know anybody on Wall Street. We actually started out in venture capital and growth equity because you could just write checks, didn't rely on other people's checks. And the money we raised was from the part…”
Connaughton: Bain kept the same Asia-Pacific country managers for 20+ years
“We've had the same country managers in Japan, in China, in India, Korea, and Australia from the very beginning, and we've been there for 20 plus years”
Connaughton: Bain staffs two deal partners and one portfolio partner per transaction
“And on top of that, we always had two deal partners. And more recently, we also have a portfolio partner on every Transaction.”
Connaughton: Bain Capital bought almost all cyclical businesses in 2006–2007
“So we bought almost all cyclical businesses in O six and O seven.”
Connaughton: Bain Capital targets 15-20 investments per fund seeking 3x-5x returns
“We're trying to find asymmetric upside, 15 to 20 shots on goal where we can not just generate a good return. And it may not be 25 times like it was in the beginning, it may not be 10 times like it was 20 years ago, but it can be three To five, and sometimes 10…”
Connaughton: All Bain Capital partners and employees co-invest in firm deals
“We've always been the head of the pack in terms of how much money we put in our own deals, and every one of the partners does that, and every one of the employees does that, is they're investing their deals.”
Connaughton: Bain Capital measures upward feedback on every deal
“I think the second one is that you cannot be successful at the firm unless you have terrific upward feedback and are able to manage a team, and we measure that every deal.”
Gordon: HCA Scaled Urban Hospital Capacity to Attract Top Physicians and Drive Profit
“If we can build the right capacity to be really important hospital systems in any given city, then that is going to put us in a position to be able to make the investments we need to make, to have the right capital base, to be able to attract the right physici…”