How Mitt Romney Made a 289% Return on Experian in 7 Weeks

The deal, which made millions and cost few jobs, shows the strengths of private equity. So why doesn't he talk about it?

Mitt Romney bain capital.jpg
Bain Capital via the Boston Globe

Attacks on Mitt Romney's career at Bain Capital have become a pervasive theme of the presidential campaign, sharply dividing Democrats and sparking a national debate about the relative morality of the private equity industry.

Every week this month, the Obama campaign has hit the airwaves with a new story of a company that was wronged by Bain, rolling out another parade of disgruntled ex-factory workers who blame Mitt Romney for the misfortune of the middle class.

But Bain's failed investments only tell part of the story. An examination of one of his most lucrative deals -- the acquisition of the consumer credit ratings company Experian -- reveals another side of Romney's record, one that the candidate himself has been reluctant to address.

By all measures, the Experian buyout was an insane success. According to a 2000 prospectus of Bain's deals, Bain invested $87 million in the consumer credit-ratings company, and flipped the company seven weeks later, reaping $252 million -- a whopping 6,638 percent annualized return on its initial investment. Although job numbers are difficult to determine, Experian had no major layoffs, and is now four times the size it was at the time of the deal.

In an exclusive interview with Business Insider, D. Van Skilling, the CEO of Experian at the time of the Bain buyout, explained how the deal went down, and told us why he thinks the Obama campaign isn't telling the whole story about Romney's time at Bain.

Like many of the companies Bain acquired, Experian Information Solutions began as a successful, but neglected, subsidiary of a larger corporation, in this case defense giant TRW. While the information services division was profitable and poised for growth, it had little in common with the core defense and automotive parts business of its corporate parent, according to Skilling.

"We were, in size, the smallest of the three segments, but we were actually producing a lot of cash, and the cash was being used to grow the automotive and the space and defense segments, rather than being reinvested in the information systems," Skilling told Business Insider. "So I said 'Either play me or trade me.'"

TRW decided on the latter, so Skilling and about 60 other Experian executives went looking for a buyer, and finally settled on a $1.01 billion offer from Bain Capital and Thomas Lee, another Boston-based buyout firm. The deal was mostly financed by debt, Skilling said, with each of the firms investing only about $100 million.

Apart from being the right price, the Bain-Thomas Lee offer was attractive because the investment group planned on keeping the company whole, and took a more gentle approach than a lot of other leveraged buyout firms at the time, Skilling said. The investment group, like the Experian executives, saw a potential for growth in the credit reporting market, particularly in the nascent direct marketing sector.

"It was good business -- it produced a lot of cash, it was profitable, and it had excellent growth potential," Skilling said. "They were keeping the business whole, which was good for the employees and good for our customers," Skilling said. "We were looking for opportunities for growth."

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Grace Wyler is a journalist based in New York. She was previously the politics editor at Business Insider and has written for Time, ViceNew York, and The New Republic.

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