Bain & Company, Inc. history, company profile (overview) and corporate video
Bain & Company, Inc. is a management consulting company headquartered in Boston, Massachusetts, United States.
Bain & Company was established in 1973 by a group of ten employees of The Boston Consulting Group. The leaders were BCG VP William W. Bain, Jr. who held a 35% interest; BCG VP Pat Graham, who held a 25% interest; and BCG Case Manager George B. Bennett, who also held a 25% interest. The balance was split among seven younger former BCG staff members, who helped form the firm.
Two BCG clients went with the breakaway group, Texas Instruments and Black & Decker. These formed the client base for the first year, after which the Bain & Co. client base expanded rapidly.
The company was originally headquartered in Lexington, Massachusetts on Militia Drive. By the end of the decade, the firm’s headquarters were in Faneuil Hall Marketplace in downtown Boston.
Founder George Braxton Bennett left during Bain’s early development, to form his own consulting company, Braxton Associates.
Under Bain’s direction, the firm implemented a number of practices that were unusual to the consulting industry in its early years. Notably, Bain & Co. would work with only one client per industry to avoid potential conflicts of interest. Partners did not carry business cards and clients were referred to by code names to enforce client confidentiality. The company won clients by boardroom referrals rather than marketing, and claimed its consultants worked on increasing a company’s market value rather than simply handing clients a list of recommendations. To win business, Bain demonstrated the increase in the price of their clients’ stocks relative to the Dow Jones Industrial Average.
The firm’s founding was followed by a period of growth in the late 1970s and early 1980s as the firm opened offices in Menlo Park, California, London, Munich, Paris, and Tokyo.
Another consulting approach used at Bain & Co. was accepting equity in lieu of fixed fees. An estimated 10% of Bain’s revenue is derived from this equity participation or “success fees”. For example, the firm took an ownership stake in fruit processor Del Monte Foods while working to revamp the company’s strategy. “Coming into a leveraged buyout situation is never easy”, said Del Monte CEO Richard Wolford. “Knowing Bain and their desire to deliver results, they probably would have provided ongoing support regardless. But the fact they own a stake doesn’t hurt.”
Even though business was sluggish and the company was overstaffed, Bain had to turn away business due to its one-client-per-industry restriction. Competition increased as other firms also adopted Bain’s implementation-focused strategy, and internal infighting among the senior partnership threatened to break up the firm. In response, Bain & Co. was formally incorporated in 1985 and, over the course of two years, an Employee Stock Ownership Plan (ESOP) was established. Bain’s senior partners began borrowing against their equity for cash, eventually leaving the firm with a heavy debt load.
As business slowed, this debt load began to squeeze the firm. Bain ultimately found itself in non-compliance with Bank of New England loan covenants. The resulting debt write-off at the Bank of New England eventually resulted in that bank’s failure in 1991.
With the company facing financial duress, Bain Capital partner Mitt Romney was asked to rejoin and lead Bain & Co. as interim CEO. Bringing along two lieutenants from Bain Capital, Romney began a traveling campaign to rally employees at all Bain offices globally. Romney also negotiated a settlement between the Bain partnership and the firm’s lenders, including a $10 million reduction in the $38 million Bain owed the Bank of New England, which by that time had been seized by the FDIC and placed in Chapter 7liquidation. Romney was able to negotiate this reduction in the debt amount with the FDIC by threatening to use the remaining cash that Bain had on hand as bonuses for Bain executives. Bain & Company paid Bain Capital a fee of $4 million for Romney’s services.
The Boston Globe pointed out that:
“Over several weeks, Romney managed negotiations with the banks and among the partners… The moment came when negotiations produced a package in which Bill 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.”
Romney’s plan involved “a complicated restructuring of the firm’s stock-ownership plan, real-estate holdings, bank loans, and money still owed to partners”. To avoid the financial crisis that a buyout would have triggered, the group of founding partners agreed to return about $100M cash and forgive the outstanding debt.
Although in the role for just one year before returning to Bain Capital, Romney’s tenure resulted in three changes to firm governance. First, ownership was officially shifted from the owners to the firm’s 70 general partners. Second, transparency in the firm’s finances increased dramatically (e.g. partners were able to know each other’s salaries). Third, Bill Bain relinquished ownership in the firm that carried his name.
Within a year, Bain became profitable again and stemmed partner defections.
In 1993, the head position was split into two roles – an executive head (Worldwide Managing Director) and a non-executive head (Chairman of the Board). Orit Gadiesh, named Bain’s first Chairman in 1993, was fundamental in maintaining Bain’s culture. After spending two years in military intelligence for the Israeli army and earning a degree in psychology from Hebrew University, Gadiesh enrolled in the Harvard Business School and graduated as a Baker Scholar. As a junior partner during the turnaround, she took a lead role in keeping senior partners from leaving the firm; as chairman, she became the first female to lead one of the major consulting firms. For the past several years, Gadiesh has been on the annual Forbes list of the 100 Most Powerful Women in Business and serves on the board of several organizations, including the World Economic Forum.
Under Gadiesh and MD Tom Tierney, Bain simultaneously loosened its restrictions around the one-client-per-industry policy, assuring clients that the firm’s strict internal professional standards prohibited the circulation of client data internally, and expanded its presence worldwide throughout the 1990s. The firm grew by 25 percent per year, expanded its office count from 12 to 26, and increased partnership from about 70 to nearly 200.
The new millennium began with Bain & Co. guiding its clients through managing the changes involved in the “New Economy”. The economic slowdown following the dotcom boom was painful to all the major consulting players. In response, the firm invested in its leadership ranks with internal promotions and key external hires. Subsequently, the economic recovery has been followed by another period of sustained growth. In 2007, the firm expanded its global footprint to 37 offices, with office openings in Kiev, Moscow, Helsinki, andFrankfurt. The worldwide consulting headcount increased to approximately 2,700. Bain now has more offices in Europe than in any other region; the upshot of which being more revenue comes from its Continental operations than either the North American or Asian markets.
The new millennium also brought changes to Bain’s traditional generalist approach to solving client issues. Due to increasing specialization in the consulting industry, the firm developed niche “Practice Areas” to serve the varying needs of its increasingly diverse multinational and local client base. Through targeted industry hires, Bain added industry experts to each of these “Practice Areas”, significantly raising its profile in fields such as financial services, healthcare, information technology and media/entertainment.
In November 2011, Bain & Company elected Bob Bechek to serve as the firm’s worldwide managing director, effective March 2012. Bechek succeeded outgoing worldwide managing director Steve Ellis, who held the role for seven years.
In addition, in February 2013, Bain & Company co-signed an amicus brief to the Supreme Court of the United States along with 277 other companies supporting the overturning of the Defense of Marriage Act.
*Information from Forbes.com, Wikipedia.org, and www.bain.com.
**Video published on YouTube by “Bain & Company Careers“