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The Cerberus Capital Management And The Three Headed Dog

The Cerberus Capital Management And The Three Headed Dog


The Cerberus Capital Management And The Three Headed Dog

by Ralph Berneth

Cerberus Capital Management is one of the world's leading private equity investment companies and a fixture of the New York Stock Exchange. In the past decade, it rose to become one of the most significant players in hedge fund holdings. However, its fortunes in recent months have changed drastically.

Its founder, Steve Feinberg, named the firm after the mythological three-headed dog that guarded the entrance to Hades. Since its start in 1992, Cerberus Capital Management has been very active in buying up and investing in firms from very diverse sectors of industry.

Cerberus Capital Management was founded by Steve Feinberg. Among the trade industry their company is considered as the younger corporation, compared from other companies that has been there for a number of years. The name of the company may seem intimidating, strong and tough but the company does not at all fit this description.

The firm was able to acquire GMAC, the financial segment of General Motors Corporation, as well as Chrysler Financial. Cerberus Capital Management was also able to buy out 80 percent of Chrysler from Daimler in 2007.

The company also owns car parts maker TA Delaware and bus builder Blue Bird. Though it has recently been hit hard by the troubles that currently beset the US automobile industry, its automotive interests are actually only a small percentage of its holdings, less than 10 percent.

The Chrysler Financial was bought off by Cerberus Capital Management, and was also able to acquire GMAC, the financial arm of General Motors, with a current holding of all the known assets of the said companies. It was established as such when the two companies declared bankruptcy and was infused with venture capital investment by the Cerberus Capital Management.

Significantly, Chrysler Financial opted not to take the proferred amount of $750 million from the government bailout scheme (the Troubled Asset Relief Program) because it didn't need the money, and because its executives refused to allow any government-imposed limits on their pay.

Currently, Cerberus Capital Management is in a tenuous position, especially with the mass departure of its investors during August 2009, who withdrew over $5.5 billion or over 71% of the hedge fund's assets. It was one of the most successful private equity firms over the last decade, but this sudden exodus of clients and money has dealt a significant blow to its position and future existence.

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