Rehnert calmed Romney's image concerns by enlisting a Chicago firm to join the deal, sharing the risk and deflecting attention from Bain.
Romney, balancing his duty to make money for his investors with his religious beliefs, let the deal go through, but declined to co-invest his own money, which partners usually did.
"I didn't want to profit from a studio that made R-rated movies," Romney said recently.By the time Bain Capital sold its interest in Artisan in 1999, it had more than tripled its investment.
A big leap
Romney's most memorable chapter during his Bain Capital years took place while he was on leave.
In the mid-1980s, Bill Bain and other founding partners of the consulting firm Bain & Company had set up an employee-stock ownership plan, or ESOP, to cash out some of their stakes. Bain was planning for his eventual retirement, so the firm borrowed heavily to buy a slate of shares belonging to him and other founding partners.
When a recession hit in the late '80s and corporations cut back on consulting services, Bain & Company's revenues plummeted. Soon, the firm was struggling to pay its ESOP debt.
With Bain & Company sinking, Harry Strachan and other younger partners turned to Romney to try to rescue the firm. They believed he had the standing with founding partners to negotiate a financial restructuring.
Over several weeks, Romney managed negotiations with the banks and among the partners. Tempers sometimes flared. Some senior partners argued that the younger partners were ungrateful. Some younger partners insisted the founding partners had hidden details of the ESOP to line their pockets.
But Romney kept his cool, Strachan recalls, sensing when he had to get an agreement or lose the deal altogether.
The moment came when negotiations produced a package in which Bain and the founding partners would give up control of the firm, turning back $30 million they had taken from the ESOP and $100 million in notes they held against the firm, Bain recalls.
Romney stayed on as chief executive.
Despite his success at Bain Capital, it was a big leap for Romney, going from running a firm that at the time had about two dozen employees to one with about 1,000 worldwide. He immediately applied the techniques that Bain Capital had learned while restructuring the companies it acquired. He began with a road show, traveling to Bain & Company offices around the world to rally employees.
He put in a new governing structure, opened up the firm's finances to all partners, and revamped the compensation system.
The firm was so close to missing payroll that Romney stopped payment on checks sent to vendors, promising to pay them later. He renegotiated debt with banks and leases with landlords. He carried out about 200 layoffs that were announced just as he took on the job.
The pressures were immense. Just as in the early days of Bain Capital, Romney would peel off his suit jacket and his shirt would be soaked in sweat, says Rehnert, the Bain Capital partner who helped Romney during the transition at Bain & Company. Sitting at his desk, Romney would catch Rehnert's attention, and start flapping his tie.
Yet Romney got it done, stabilizing the consulting firm and turning it over to new leadership in 1991. He returned to Bain Capital, where he worked until he ultimately left in 1999 to run the Salt Lake Olympics.Rehnert says the experience of saving Bain & Company changed Romney. He never saw him flap his tie again.
Next: Rising expectations
Contributing: Beth Healy, Scott LaPierre and Ann Silvio.
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