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Investment Banks, Hedge Funds, and Private Equity, 2nd Edition by David Stowell

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Cerberus and the U.S. Auto Industry

Introduction

In August 2005 General Motors Acceptance Corporation (GMAC) announced that it had entered into an agreement to sell a 60% equity interest in its commercial mortgage subsidiary, GMAC Commercial Holding Corp (GMACCH), to a high-profile investor group led by private equity giant Kohlberg Kravis Roberts & Co. (KKR). The KKR-led group later upped its ante in March of the following year, increasing its investment to almost $9 billion for a 78% stake in the mortgage business’s equity. Less than two weeks after this announcement, Cerberus Capital Management—a multistrategy, $22 billion New York hedge fund led by manager Stephen Feinberg—made its own announcement, stealing KKR’s headlines. With Citibank’s ...

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