HomeResearch & Knowledgeback to HomeFinanceback to Research & KnowledgeCerberus acquires GMAC (A): General Motors’ financial troublesback to Finance

Case Study

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

By Arturo Bris and Inna Francis

12 pages

December 2007

Order this case study

Reference: IMD-1-0267

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

Keep reading

Article

Here’s what we predicted for 2024… how did we do?

Did our predictions for 2024 come true, a turbulent election year, bitcoin and CBDC, COP29 and electric cars, China, EU integration and Euro football

Finance Future Readiness Geopolitics Strategy Sustainability

By Robert Hooijberg, Arturo Bris, David Bach, José Parra Moyano, Michael R. Wade, Julia Binder, Howard H. Yu, Simon J. Evenett, Alyson Meister, Salvatore Cantale and Stefan Michel

in I by IMD

Article

Time to go green? What bonds are best for you?

Green and sustainability-linked bonds offer companies new funding to reach urgent sustainability goals. Salvatore Cantale and Barry Gavin explain how to make the most of a booming market.

Finance Sustainability

By Salvatore Cantale and Barry Gavin

in I by IMD

18 December 2024

Article

Growing beyond your skillset

Anne has recently been named the CFO of a large multinational manufacturing group. It is a big change of direction: before this, she worked as a senior consultant with a top consultancy. Her appointment stems from a long and successful relationshi...

Why investors often overlook the next big thing - Venture Capital

Bold and unproven ideas may struggle to attract early investment, but that doesn't mean they are doomed to fail.

Finance Entrepreneurship

By Raphaël Jean Luigi Grieco

in I by IMD

14 December 2024

Article

Sia Houchangnia on building relationships that empower founders

In this episode of Capital Conversations, Sia Houchangnia presents a specific approach to providing effective advice and support to founders.

Finance Entrepreneurship

By Karl Schmedders and Raphaël Jean Luigi Grieco

in I by IMD

13 December 2024

Case Study

IG4 Capital: Private equity with a purpose

Finance Emerging Market Entrepreneurship Sustainability

By Benoit F. Leleux and Arthur de Bonis

Article

What pension funds could learn from Yale

Pension funds can unlock the potential of venture capital by adapting the successful endowment model, managing risks and illiquidity for long-term growth and stability.

Finance Venture Capital

By Raphaël Jean Luigi Grieco

in I by IMD

29 November 2024

Case Study

Entrepreneurship through acquisition: Vanessa Monestel’s search fund

GENEVA (SWITZERLAND), OCTOBER 2023. Vanessa Monestel was ecstatic. a day earlier, she had just signed the letter of intent (LOI) to acquire an Amsterdam-based fashion company. This was the culmination of her 18-month search for a company to acquir...

Entrepreneurship Finance Strategy

By Benoit F. Leleux, Joseph Kovacs, Kristel Rouiller, Sebastien Braun and Thierry Meouchi

Case Study

Entrepreneurship through acquisition: Sébastien Perroud and the IAR Group

GENEVA (SWITZERLAND), AUGUST 2021. There was a lot at stake for Sébastien. This was the culmination of his 18-month NCA supported search journey to find a company to acquire. Instead of a single target, he was now faced with the prospect of acquir...

Entrepreneurship Finance Strategy

By Benoit F. Leleux, Dominik Hanslin, Iuliia Mordacheva, Matthias Rey and Frank Schuster

Article

The investor magnet: How to set up a board that attracts investors

Today's business environment is marked by heightened uncertainty, driven by shifting political landscapes, accelerated technological advances, and shifting consumer expectations.

Finance Board

By Didier Cossin and Yukie Saito

in Entrepreneur

22 November 2024

Time to go green? What bonds are best for you?

By Salvatore Cantale and Barry Gavin
in I by IMD 18 December 2024

Summary

Green and sustainability-linked bonds offer companies new funding to reach urgent sustainability goals. Salvatore Cantale and Barry Gavin explain how to make the most of a booming market.

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Finance

Sustainability

Browse all topics

IG4 Capital: Private equity with a purpose

By Benoit F. Leleux and Arthur de Bonis
Case reference: IMD-7-2545 ©2024

Summary

SEPTEMBER 2023, SÃO PAULO (BRAZIL). Gustavo Buffara was painstakingly putting the finishing touches on the IG4 Private Equity Fund III presentation. Co-founded by Gustavo in 2016, IG4 Capital had grown to become a leading force in private equity in Latin America with a unique value proposition that focused on private equity special situations. With 52 professionals worldwide across seven offices (in São Paulo, London, Lima, Madrid, Bogotá, Washington, DC and Santiago), the firm was now heading to manage some $1.7 billion, with more than $1.1 billion invested in special situations over recent years. What made Gustavo particularly proud was the fact that the firm was able to operate not only under the highest sustainability standards, as an early signatory of the Principles for Responsible Investment (PRI), but also as a fully certified B Corp, a first in emerging market private equity. IG4’s portfolio companies now generated more than $2 billion of turnover with around 20,000 employees in different countries across Latin America, and many of them had achieved or were on their way to their own B Corp certifications. Could a Cerberus-inspired special situations strategy, often perceived as brutal, be adapted to a more culturally sensitive, developing-market equivalent, with clearer environmental, social and governance (ESG) integration? In other words, could “vulture capital” be turned into “culture capital”? The value proposition resonated with investors, and the track record of IG4 Funds I and II were now solid pillars upon which to build. But what else could the company do to ensure that its private equity investments in different segments, with a deep ESG toolbox, would help establish sustainable capitalism in the Latin American region? What else should it consider doing to reaffirm its ESG credentials even further?

Reference IMD-7-2545

Organization IG4 Capital Partners

Industry Finance and Insurance, Private Equity

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Finance

Emerging Market

Entrepreneurship

Sustainability

Browse all topics

Entrepreneurship through acquisition: Vanessa Monestel’s search fund

By Benoit F. Leleux Joseph Kovacs Kristel Rouiller Sebastien Braun and Thierry Meouchi
Case reference: IMD-7-2514 ©2024

Summary

Reference IMD-7-2514

Organization Novastone Capital Advisors

Industry Finance and Insurance, Private Equity

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Entrepreneurship

Finance

Strategy

Browse all topics

Entrepreneurship through acquisition: Sébastien Perroud and the IAR Group

By Benoit F. Leleux Dominik Hanslin Iuliia Mordacheva Matthias Rey and Frank Schuster
Case reference: IMD-7-2515 ©2024

Summary

Reference IMD-7-2515

Organization IAR Group

Industry Finance and Insurance, Private Equity

Available Languages English

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Entrepreneurship

Finance

Strategy

Browse all topics

The investor magnet: How to set up a board that attracts investors

By Didier Cossin and Yukie Saito
in Entrepreneur 22 November 2024

Summary

Today's business environment is marked by heightened uncertainty, driven by shifting political landscapes, accelerated technological advances, and shifting consumer expectations.

Contact

Research Information & Knowledge Hub for additional information on IMD publications

Related topics

Finance

Board

Browse all topics