Bain’s Lavine: PE can’t be in a defensive crouch

Jonathan Lavine, co-managing partner of Bain Capital, said the private equity industry should engage more with policymakers and be more transparent on both good and bad outcomes.

Private equity firms should focus on telling their stories, both good and bad, according to Bain Capital co-managing partner and Bain Capital Credit CIO Jonathan Lavine.

“I don’t think the licence to operate is at risk, but I do think that PE firms need to be a little bit more transparent about the good and the bad – it can’t be in a defensive crouch,” Lavine said to a crowd of more than 400 business students at the London School of Economics Alternatives Conference in London on Tuesday.

“I think that they need to engage more with policymakers, not sort of hide, but tell the story. I do think there is a responsibility hopefully that becomes a two-way street. Nobody in the PE world wants to create an industry that is perceived negatively.”

Lavine also noted that being defensive is at some point, “bad for business”.

“We have to be willing to recognise that there’s not going be a 100 percent hit rate … some of the bad stuff exists because when you do 100 deals only 90 or 85 of them are going to be successful,” Lavine said. “But doing a better job of managing that other 15 percent is important.”

On the criticism private equity has received, Lavine said several factors have drawn the industry in a negative light, including the word “private”, the fact that it has been reticent to tell its story and its role in the economy, as well as its size.

“Anything that grows has a diversity of outcomes … and therefore there’s more good stories and there’s more bad stories. I think the industry has been caught in some situations – the 2012 elections among them – where the bad stories got featured more than the good ones. But as a practical matter, our mission is … to leave it better than we found it.

Asked about Bain’s failed investment in US retailer Toys ‘R’ Us which filed for bankruptcy in 2017, Lavine said the firm tried to be “as good as we could, members of the community”.

“But it’s [an] unfortunate end; it is devastating to us anytime a job is lost, let alone a company is lot. It’s super painful,” Lavine said.

Bain and KKR, which bought the company for $6.6 billion in 2005, created a $20 million severance fund to provide compensation to the more than 30,000 workers affected.