Case Detail

Case Summary

Cerberus and the U.S. Auto Industry

Case Number: 5-107-009, Year Published: 2007, Revision Date: June 01, 2009

HBS Number: KEL315

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Authors: David Stowell; Jeremy Hartman

Key Concepts

Mergers and Acquisitions, Private Equity Investment, Corporate Governance, Hedge Fund Investments

Abstract

This case explores how and why GM became a major user of private equity and hedge fund capital, as well as the risks and rewards of these new relationships. The Cerberus transaction, audacious in both its size and complexity, is explored in detail. What were the alternatives for GM, and what risks and opportunities lay ahead for both parties? This case further investigates the benefits, disadvantages, and potential conflicts of interest that evolved as GM’s many suppliers increasingly embraced low-cost, nontraditional financing from hedge funds.

Learning Objectives

To analyze the significant role that private equity and hedge funds play in providing capital to corporations, especially those in distressed industries.

Number of Pages: 16

Extended Case Information

Teaching Areas: Finance

Teaching Note Available: Yes

Geographic: United States

Industry: Private Equity/Hedge Funds

Organization Name: Cerberus Capital Management

Organization Size: Large

Year of Case: 2007