Guarding the gates
Cerberus Capital Management is a leading private equity firm which
has a history of keeping its investments and its business hidden
from the public eye. The firm was formed in 1992 by Steven A.
Feinberg, a Princeton graduate, who stays under the radar as much
as possible. This shunning of publicity may come from bad
memories with a former employer; Feinberg's first experiences in
business were at investment bank Drexel Burnham Lambert, a company
that was dissolved due to securities fraud. Perhaps
Feinberg's colored past can account for the derivations of the name
of his company as well. Cerberus was named after the
three-headed dog that guards the gates of hell in Greek
mythology. The company is based in New York and has offices
in Atlanta, Chicago, Los Angeles, London, Baarn (Netherlands),
Frankfurt, Tokyo, Osaka and Taipei.
Despite its low-key public exterior, Cerberus has made a number of
high-profile deals in the past few years, most notably its purchase
of automotive manufacturer Chrysler from Daimler in 2007.
Cerberus has a large portfolio with holdings in the following
industries: aerospace and defense, apparel, automotive and
industrial, building products, commercial services, consumer and
retail, financial services, health care, manufacturing and
distribution, paper, packaging and printing, technology and
telecommunications, transportation, and travel and leisure.
Notable companies owned by Cerberus include Aozora Bank, BlueLinx,
GMAC Financial Services, North American Bus Industries, Peguform
Group, Spyglass Entertainment and Tower Automotive.
Though not quite as notorious as The Carlyle Group for its
government connections, Cerberus has a few top ranking political
figures on its roster of employees. The most prominent
example is its current Chairman John W. Snow, who once served as
U.S. Secretary of the Treasury under the George W. Bush
administration. Cerberus also has ties to former Vice
President Dan Quayle. Quayle currently serves as chairman of
global investments for the firm.
The tragic Chrysler venture
Cerberus had high hopes when it purchased 80.1 percent of Chrysler
automotive from its German owner, Daimler-Benz in May 2007.
The private equity firm paid about $7.1 billion for Chrysler and
was reported to take an extreme sense of pride at reviving the
American tradition of car manufacturing. Unfortunately, the
immediate future for the auto industry was not particularly
bright. With rising gas prices and a strapped economy, in
spring 2009, Chrysler announced Chapter 11 bankruptcy. In
June 2009, the U.S. bankruptcy court ruled that all Chrysler's
assets be sold to the group of Italian carmaker Fiat.
Cerberus' loss of Chrysler and GMAC led its investors to think
twice about their stakes at the private equity firm. From a
once-prestigious hedge fund, it now has experienced massive capital
slump. It was reported that 77 percent of Cerberus' hedge
fund assets have been withdrawn by its clients since the first
quarter of 2009. According to The Wall Street
Journal, Cerberus restructured some policies, hoping to
persuade its clients to move their assets to a new fund within the
firm and at the same time give the investors an option to leave the