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Bain kicks off 2012 with growth equity deal

The firm has completed its first deal of the year, investing $238m from both its latest buyout and venture capital funds in consumer warranty provider SquareTrade.

Bain Capital has completed a $238 million growth equity investment in consumer warranty provider SquareTrade.

The consumer-oriented financial services company offers branded warranties for consumer products and experienced nearly 3x year-on-year sales growth in 2011, according to a statement.

Bain is investing in the company from both its $10.7 billion tenth buyout fund and its $467 million fourth venture capital fund, Bain Capital Venture Fund 2009.

“From an operating perspective, it’s a very equal partnership between ourselves and the venture team,” Bain managing director Phil Loughlin told Private Equity International. The deal represents Bain’s first completed investment of 2012.

“Even in the stagnant economy that we’re in now, it may be stagnant in aggregate, but it’s a dynamic economy as well, and you see a lot of disruptive technologies, of which [SquareTrade] is an example,” Loughlin said.

Bain Capital has been front and center in a negative attack on private equity due to founder Mitt Romney’s bid for the Republican nomination in the upcoming US presidential election. Earlier this month, a group supporting candidate Newt Gingrich, who has been critical of Romney’s private equity past, posted a short clip from an online video denouncing Romney’s work as head of Bain Capital. Romney headed Bain from its founding in 1984 to 1999.

A public pension LP with no affiliation to Bain said the industry will get beaten down as long as Romney is in the forefront of the campaign. However, the negativity will not affect the LP’s commitment to the asset class, because overall performance is too strong.

“The fact is, private equity continues to outperform relative to every other asset class,” the LP said. The headline-grabbing negativity “stems from largely uneducated opinions”, the LP said. “It’s easy to throw this stuff around, and people don’t understand what they’re talking about. They read in the newspapers that alternatives [are] bad and they believe it.”