Bain & Company-Private Equitys Road Map to Profits
When Thomas H. Lee Partners, Bain Capital
and Providence Equity Partners joined with
Edgar Bronfman Jr. to acquire the Warner
Music Group (WMG) from Time Warner in
2004, the $2.6 billion buyout looked to some
like a triumph of hubris over common sense.
Even though WMG had a world-class roster
of talent and a legendary catalog, the music
business was in the doldrums. Digital piracy
was rampant. Consolidation among traditional
retailers was squeezing the music industry
on one end of the business. Meanwhile,
the cost of acquiring and marketing artists
squeezed it on the other, as freewheeling
competition among record labels had inflated
the price of signing breakthrough acts. Against
that background, the new owners seemed
unlikely to recoup their initial investment,
much less reap the high returns private
equity deals are expected to generate.