themcglynn.com

28 Jul

BUYOUTS-Controversial Sensata a textbook case for Bain Capital

NEW YORK, July 26 (Reuters-BUYOUTS) – Sensata Technologies Holding
NV recently became a flashpoint in Mitt Romney’s presidential
campaign, after workers at an Illinois factory appealed to the former
Bain Capital executive to prevent the closing of their plant and the
transfer of work to China.

From Bain Capital’s point of view,
however, the maker of automotive sensors has been a huge success,
quadrupling the firm’s investment since it acquired the business from
Texas Instruments in 2006. Seth Meisel, a managing director at the
Boston-based buyout shop, discussed the company at an industry
conference last month, using it as a central example of the way Bain
Capital can profit from its investments despite troubles in the macro
economy, through what Meisel described as “second-order
effects.”

Indeed, the Sensata deal is right in
Bain Capital’s wheelhouse – a complicated carve-out. Bain Capital
invested $770 million of equity in April 2006 for the Dutch division
of Texas Instruments, the maker of sensors and controls that go into
vehicles, appliances and other products.

At the time of the deal, the economy
had already peaked and sectors such as housing and auto sales were
headed for serious slumps, Meisel said in remarks prepared for his
presentation. “But our diligence revealed underlying second
order drivers – safety, fuel efficiency, convenience and emissions –
that would lead to growth even if the macro slowed.”

For instance, demand was growing among
automakers for electronic stability controls – computerized systems
that prevent cars from skidding, Meisel said. Too, Bain Capital
anticipated future growth in emerging markets such as China. Although
vehicle sales would fall by a third during the Great Recession and
housing starts would tumble by nearly three quarters, Bain Capital
and the Sensata management team managed to keep revenue and EBITDA
stable during the slump and to build the company both organically and
through acquisitions as the economy began to recover in 2009.

As a result, at a compound average
growth rate from 2006 through 2011, “revenue grew nearly 10
percent, EBITDA more than 10 percent and we have approximately
quadrupled our investors’ investment thus far,” Meisel said.

The McGlynn: “But the workers, such as

the ones in Freeport, Illinois, who played

by the rules and put in a day’s work for

a humble day’s pay are not smiling.

They are scared to death about how they

are going to pay their bills and survive because of Bain.

This is Mitt Romney’s legacy and vision for America.”

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