Named after the mythical three-headed dog that guards the gates of hell, Cerberus Capital Management has been a driving force in private equity. One of its most notable moves was its 2007 purchase of 80% of Chrysler from Daimler (a stake that has since been eradicated). Cerberus was also the lead investor of a group that acquired 51% of GMAC (now Ally Financial), the financing arm of General Motors. Additionally, the firm owns bus maker Blue Bird and Tower Automotive. Although the firm made headlines with its automotive investments (and that industry's financial woes), Cerberus isn't solely concerned with cars and trucks: Automobile interests actually account for less than 10% of its assets under management.
Other Cerberus holdings include stakes in Japanese bank Aozora, UK home improvement chain Focus (DIY), and real estate services firm LNR Property. Building its real estate holdings, Cerberus acquired time-share operator Silverleaf Resorts for some $94 million in mid-2011. Along with Chatham Lodging Trust, it won a bid to buy about 65 hotels from bankrupt Innkeepers USA for some $1.1 billion. Cerberus and Chatham terminated the deal, citing an unnamed material adverse change, but the companies agreed to an amended deal with a lower purchase price of $1 billion.
Also in 2011 Cerberus acquired the US-based global billing and payments unit of 3i Infotech. The deal included subsidiaries Regulus Group and J&B Software, which were combined.
Cerberus made its first major foray into the health care field in 2010 with the acquisition of Caritas Christi (now Steward Health Care System), one of New England's largest hospital operators. Cerberus plans to invest $400 million in the hospital chain (in addition to assuming some $495 million in debt). The company also transformed the nonprofit hospital to a for-profit organization. The deal was announced shortly after major health care legislation was signed into law potentially opening up health care to millions. Caritas Christi, which operates lower-cost hospitals in Massachusetts, is prime to stand out in a market dominated by higher-cost providers.
Cerberus also bought government contractor DynCorp for some $1.5 billion in 2010. Cerberus has plenty experience with the military: It formed Freedom Group in 2007 to be the holding company for its gun and ammunition operations. The company is now spinning off Freedom Group (which counts the US military among its clients) to the public markets via a planned IPO.
Cerberus became heavily involved in the automobile industry believing that the sector had long been undervalued. In addition to buying stakes in GMAC, Chrysler, and Tower Automotive, the company acquired interests in CTA Acoustics (automobile insulation), Guilford Mills (automotive seating products), and Peguform Group (plastic auto interior and exterior parts).
The investments proved untimely, as the global economic crisis took a severe toll on automakers. Within a couple of years of Cerberus' investment in Chrysler, the debt-laden car company slowed or shut down production at about a half-dozen manufacturing facilities and cut its workforce by more than 30,000. Chrysler received billions in federal loans in 2008 and 2009; the second large bailout came with the condition that Cerberus drop its majority stake. Cerberus temporarily retained Chrysler's finance arm but the rest of its holdings, including the mortgage for Chrysler's Michigan headquarters, were eradicated. In 2011 Cerberus sold most of its interest in Chrysler Financial to Canada's Toronto-Dominion Bank (and its US-based TD Bank subsidiary) for some $6.3 billion. The lender was then rebranded TD Auto Finance.
On the GMAC front, the GM finance company converted to a bank holding company in 2008, giving it access to federal bailout funds for banks. Because commercial companies cannot own major stakes in banks, though, Cerberus reduced its stake in the company to less than 15%. (In 2009 GMAC Bank changed its name to Ally Bank, distancing itself from the GM name. GMAC followed suit the following year.) Ally Financial took itself public in 2011.
Cerberus' task of creating profits with its automotive assets has proven a daunting one, given the state of American automakers, but the firm has had several things in its corner. For one, because Cerberus has extensive investments in the auto parts industry, it carries added leverage when dealing with suppliers. Chairman John Snow also gives Cerberus an edge. The former Treasury secretary in the Bush administration, Snow also briefly served as the head of the National Highway Traffic Safety Administration while Gerald Ford was president. Robert Nardelli, formerly the CEO of Chrysler, joined Cerberus in 2009 to advise on its portfolio companies' operations.
Cerberus has offices in Atlanta, Chicago, Los Angeles, and New York City. It has international offices in Germany, Japan, the Netherlands, the UK, and Taiwan.