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With the announcements this morning that Cerberus Capital Management LP, a $24 billion investment firm, will buy 80.1% of Chrysler for $7.4 billion, it's officially a trend that private equity is in the driver's seat. Cerberus already owns 51% of General Motors Corp. (NYSE: GM)'s GMAC -- the Finance unit -- and Ford Motor Co. (NYSE: F)'s founding family wants to sell out. Why does private equity find the automobile business so appealing?
There's an interesting side issue going on here: founding families are realizing that now is the time to sell. This topic is being covered in excruciating detail [subscription] with the proposed merger between News Corp. (NYSE: NWS) and Dow Jones & Company Inc. (NYSE: DJ).
Founding families have it great. They can clip million dollar annual coupons and spend their time riding motorcycles and playing tennis. But selling out means giving up on that lifestyle. So the willingness of founding families to sell spells trouble for public equity investors. Here's why:
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