Cerberus Capital Management, named for the three-headed canine guardian of Hades in Greek mythology, just sank its teeth into a majority stake of troubled automaker Chrysler. But given its string of recent acquisitions, investors may wonder whether this beast has bitten off more than even three heads can chew.
Though Cerberus has a website, don't expect to get too much color on the company by visiting it. In the "about" section, the firm cites a "long-term investment horizon and focus on value creation," with an eye toward helping its portfolio companies become industry leaders. Press releases are sparse; the most recent reprints an op-ed written by John Snow, former U.S. Treasury Secretary and current chairman of Cerberus.
With the exception of energy and commodity products, the firm's self-proclaimed industry expertise touches a good portion of the global economy. Its investments reveal a similar diversity, including ACE Aviation Holdings (parent company of Air Canada), building-products company Bluelinx Holdings
Fresh from the Chrysler buy, rumors are now flying that Cerberus will make a hard run at Canadian telecom giant BCE
At a potential $28 billion-plus price tag, a buyout of BCE is no joke -- it would rank right up there with recent major buyouts such as the $26 billion that purchased SLM
A deal for BCE would also be a very different, and far more traditional, type of buyout compared to the Chrysler deal. While not particularly exciting, BCE is healthy and stable, and it churns out a nice amount of cash. And though I wouldn't call it a bargain, paying seven times EBITDA for the company may be as reasonable as it gets these days. BCE also lacks the immediate need for hands-on action to turn around business, the way that Chrysler does.
With billions of dollars continuing to pour into the private-equity and hedge-fund industries, one of the major drivers of deal activity is the firms' need to put that money to work. Undeployed capital earns no fees, and we all know how useless that is. Though it may not offer the potential upside that a successful turnaround of Chrysler would, a buyout like BCE would put a lot of capital to work at once, and would present a less frightening downside case.
For now, financiers appear ready and willing to continue financing major buyouts with heaps of relatively cheap debt. Until that dries up, expect to see this three-headed dog continue to scrap it out with KKR, Blackstone, and the growing number of other firms that are pushing their way into the megadeal spotlight.
Fool contributor Matt Koppenheffer hasn't done any billion-dollar buyouts lately, but he did buy three CDs on Amazon.com yesterday. He does not own shares of any of the companies mentioned. The Fool's disclosure policy isn't a public company, but if it were, it'd go private -- it's just so chic right now.