Investment Banks, Hedge Funds, and Private Equity, 2nd Edition

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 ...