Saying they turn companies around is being generous. They typically don’t buy companies that are in the dumps, they buy companies that are humming along and might have room for improvement, cut expenses by firing employees, raise debt, and try to put the company in a good enough position to meet debt obligations. I wouldn’t credit them with turning too many companies around. If anything they are “turned around” from the debt laden messes that Bain creates into something the company looked somewhat similar to before the buyout.

So if these companies are "humming along" why are they selling to Bain? If they're doing so great, why doesn't someone outbid Bain?

They sell to Bain because it’s easy, makes the shareholders happy, and the board and executives get rich from it. And to your second question, an interesting read from the FT https://www.google.com/amp/s/amp.ft.com/content/e1732e1c-fa7...

They actually did turn around Toys R Us after acquiring it. In 2005, they were digging out from yet another failed attempt to reinvigorate their brand (which peaked in the 90s). They made strides in the late 00s with a big push into online, but growth stalled as competition from other retailers grew.

Why aren't these downstream investors pricing accordingly then? Less sophisticated than Bain? Or are Bain's successes enough to mollify any fears about their failures?

They also have a long history of running companies into the ground via LBOs.

Just look at Guitar Center. Unfortunately when they explode, they're going to take companies like Gibson and probably also Korg with them. Gibson is already in the process of unraveling right now. Their impending bankruptcy was obvious when they didn't have a booth at NAMM this year.

It's absolutely predatory behavior what they did.