HomeResearch & Knowledgeback to HomeFinanceback to Research & KnowledgeCerberus acquires GMAC (B): The transactionback to Finance

Case Study

Cerberus acquires GMAC (B): The transaction

By Arturo Bris and Inna Francis

9 pages

December 2007

Order this case study

Reference: IMD-1-0268

Hedge fund Cerberus Capital Management assembled a deal to buy a majority stake in GMAC – the financing business of auto maker GM. The sale of a majority stake in GMAC’s financing arm was part of a strategy to return GMAC’s credit rating to investment grade, which would lower its cost of borrowing – essential for a finance company to remain competitive. The sale would also provide a cash infusion to parent GM, which was struggling under the weight of a massive fixed cost structure and fierce competitive pressures.

Learning Objective

Address the question of whether Cerberus and GMAC can structure a deal that would give a private equity firm the return they needed and give GMAC investment-grade rating. Private equity and hedge fund investors usually buy companies in order to pile on debt, but GMAC could not garner investment-grade ratings with a high leverage ratio. Another complication to be considered was the auto finance business, which made up a little less than half of GMAC’s revenue. Participants may question whether the private equity firm should get involved in financing GM cars when the auto maker’s market share is sliding and the company is bordering the threat of bankruptcy protection.

Keywords

Private Equity, Acquisition, Capital Structure, Hedge Fund

Settings

United States of America
General Motors
May 2005 - December 2006

Type

Published Sources

Available Languages

English

IMD case studies are distributed through case clearing houses. In order to browse the collection and purchase copies please visit the links below.

The Case Centre

Cranfield University

Wharley End Beds MK43 0JR, UK
Tel +44 (0)1234 750903
Email [email protected]

Harvard Business School Publishing

60 Harvard Way, Boston MA 02163, USA
Tel (800) 545-7685 Tel (617)-783-7600
Fax (617) 783-7666
Email [email protected]

Asia Pacific Case Center

NUCB Business School

1-3-1 Nishiki Naka
Nagoya Aichi, Japan 460-0003
Tel +81 52 20 38 111
Email [email protected]

IMD retains all proprietary interests in its case studies and notes. Without prior written permission, IMD cases and notes may not be reproduced, used, translated, included in books or other publications, distributed in any form or by any means, stored in a database or in other retrieval systems. For additional copyright information related to case studies, please contact Case Services.

Contact

Research Information & Knowledge Hub for additional information on IMD publications

This case study is part of a series

Cerberus acquires GMAC (A): General Motors’ financial troubles
Cerberus acquires GMAC (B): The transaction

This case study is part of a series

Cerberus acquires GMAC (A): General Motors’ financial troubles
Cerberus acquires GMAC (B): The transaction

Cerberus acquires GMAC (A): General Motors’ financial troubles

By Arturo Bris and Inna Francis
Case reference: IMD-1-0267 ©2007

Summary

Hedge fund Cerberus Capital Management assembled a deal to buy a majority stake in GMAC - the financing business of auto maker GM. The sale of a ma...

Reference IMD-1-0267

Organization General Motors

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Finance

Browse all topics

Related topics

Finance

Browse all topics

Related content

Case Study

Cerberus acquires GMAC (A): General Motors’ financial troubles

Hedge fund Cerberus Capital Management assembled a deal to buy a majority stake in GMAC - the financing business of auto maker GM. The sale of a ma...

Finance

By Arturo Bris and Inna Francis

Keep reading

Article

Climate Risk - CFO Horizons - Financial Imperative

CFOs must drive a financially disciplined way to manage environmental and climate risk amid growing push back against sustainability efforts.

Finance Sustainability

By Karl Schmedders

in I by IMD

Article

Lifepreneurs - Rethinking the default

Women’s realities are often overlooked, but lifepreneurs—entrepreneurs innovating from experience—are turning struggles into profit and systemic change.

Finance Innovation

By Vanina Farber

in I by IMD

Article

AI Adoption - From artificial to actionable - CFO

CFOs can rethink underperforming AI adoption by focusing on business value, data readiness, and employee buy-in.

Artificial Intelligence Business Transformation Finance Technology Management

By José Parra Moyano

in I by IMD

Article

Is a US crypto reserve the next Fort Knox or a financial time bomb?

US President Donald Trump’s full embrace of digital assets has sent shock waves through the cryptocurrency market, driving a price surge while creating both new opportunities and heightened risks for investors and corporations. Last week, Mr Trump...

Geopolitics Digital Finance

By José Parra Moyano

in The National

7 March 2025

Case Study

DSS+: Carving out a sustainability consulting leader

Finance Entrepreneurship Sustainability

By Benoit F. Leleux, Giorgio Pignalosa, Larissa Margot Bieler, Mojisola Onabanjo Akinkunmi and Nicolas Campodonico

Article

Companies need a first-rate geopolitical radar

Ten years from now, we’ll know which companies best navigated geopolitics. And the hunt will be on for enduring lessons. Which firms made the smartest adjustments to their global commercial footprint by exiting certain markets, doubling down on ot...

Geopolitics Finance

By Simon J. Evenett

in fDi Intelligence

4 February 2025

Case Study

Brookfield Asset Management Catalytic Transition Fund

Finance Economics Sustainability

By Arturo Bris and Raphaël Jean Luigi Grieco

Article

The knowledge bank: an essential guide to venture capital

Explore top books, websites, and podcasts recommended by IMD expert Jim Pulcrano for anyone venturing into or exploring venture capital, from entrepreneurs to investors.

Decision Making Economics Entrepreneurship Finance Start-up Venture Capital

By Jim Pulcrano

in I by IMD

Is a US crypto reserve the next Fort Knox or a financial time bomb?

By José Parra Moyano
in The National 7 March 2025

Summary

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Geopolitics

Digital

Finance

Browse all topics

DSS+: Carving out a sustainability consulting leader

By Benoit F. Leleux Giorgio Pignalosa Larissa Margot Bieler Mojisola Onabanjo Akinkunmi and Nicolas Campodonico
Case reference: IMD-7-2639 ©2025

Summary

The case examines the entrepreneur-led carve out and buyout of dss+, DuPont’s safety and sustainability consulting division, by Gyrus Capital and dss+ management team. dss+ (formerly “DuPont Sustainable Solutions”) played a pivotal role in high-risk industries such as oil, gas, and chemicals, providing critical consulting services at a time when global regulatory pressure on operational safety and sustainability was intensifying. Gyrus Capital, a mid-market private equity specialist, came together with the management team to engineer the buyout, based on the firm’s strong and predictable revenue streams, long-term client relationships and specialized expertise in safety and sustainability consulting. What emerged out of the 2019 transaction was an independent sustainability consulting powerhouse with over 1,500 consultants around the world. By 2024, dss+ was still expanding rapidly in terms of staff and domains of expertise, not to mention geography, and had to respond to quickly evolving external and internal demands, with clients increasingly expected to be served globally on a full range of sustainability-related services. With a strong sense of purpose (saving lives and creating a sustainable future), a potent pitch line (Protect. Transform. Sustain), over 750 clients on 1,800 projects across 41 countries, a global team of 1,500 people and plenty of organic growth across 7 core industries, the company was clearly heading for the stars. Yet, new questions loomed: Was it time to start managing that wild growth, deepening competitive advantages and building functional moats? How would dss+ remain competitive? Was it time to put a few new initiatives on high octane fuel: Leadership? Digital transformation? Global growth? Some totally new ideas?

Reference IMD-7-2639

Organization dss+, Gyrus Capital, Inflexion

Industry Services, Environmental Services;Healthcare, Health and Medical Services;Services, Public Safety;Business Management Services, Consultancy

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Finance

Entrepreneurship

Sustainability

Browse all topics

Companies need a first-rate geopolitical radar

By Simon J. Evenett
in fDi Intelligence 4 February 2025

Summary

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Geopolitics

Finance

Browse all topics

Brookfield Asset Management Catalytic Transition Fund

By Arturo Bris and Raphaël Jean Luigi Grieco
Case reference: IMD-2652 ©2024

Summary

Brookfield’s Catalytic Transition Fund is a case study in how the financial industry can spearhead sustainable development. Brookfield Asset Management announced an initial closing of $2.4 billion for the Catalytic Transition Fund, marking a significant milestone toward the target of raising up to $5 billion for deployment to clean energy and transition assets in emerging markets. $1 billion of capital was provided by ALTÉRRA, the world’s largest private investment vehicle for climate finance based in the United Arab Emirates, with the purpose of mobilizing investment at scale to finance a new climate economy. The fund is focused on deploying capital into clean energy and transition assets in emerging markets in South and Central America, South and Southeast Asia, the Middle East, and Eastern Europe. This strategic partnership will help drive clean energy investment into emerging markets, where investment needs to increase sixfold over current levels to reach the $1.6 trillion required annually by the early 2030s in line with global net zero targets.

Reference IMD-2652

Organization Brookfield Asset Management

Industry Finance and Insurance, Private Equity

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Finance

Economics

Sustainability

Browse all topics

The knowledge bank: an essential guide to venture capital

By Jim Pulcrano
in I by IMD

Summary

Explore top books, websites, and podcasts recommended by IMD expert Jim Pulcrano for anyone venturing into or exploring venture capital, from entrepreneurs to investors.

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Decision Making

Economics

Entrepreneurship

Finance

Start-up

Venture Capital

Browse all topics