Deals that changed the market in 2006: Cerberus FIM Investors’ acquisition of GMAC
The $7.4 billion deal showed that anything is possible for a determined private equity firm with an experienced operations team.
Deal type: Cerberus FIM Investors’ $7.4 billion acquisition of a 51% stake in General Motors Acceptance Corporation
When GM made the decision to sell a majority stake in its General Motors Acceptance Corp (GMAC) unit in early 2003 it had one clear objective: it wanted to sell the subsidiary to a highly rated (by which it was assumed financial) institution in order to preserve its investment-grade rating. The deal that was eventually struck between GM and a consortium headed by Cerberus Capital Management achieved neither of those things: GMAC was sold to a private equity buyer in a deal that left the company with a double-B rating. But this deal was a stark illustration of the flexibility and buying power that private equity players have been afforded through their access to cheaper funding and greater leverage.
The successful sale of GMAC was never going to be easy. As rating agency Moody’s pointed out at the beginning of 2006: “We believe that there are very few enterprises worldwide that have the strategic interest, credit profile and financial wherewithal to purchase a controlling stake in GMAC.”