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Wednesday, May 16, 2007 

Discussion of Cerberus purchasing Chrysler

You have to check this out. NPR's show called Open Source had an hour-long discussion on private equity and the Daimler Chrysler-Cerberus deal in particular. Cerberus bought Chrysler (for $7.4Bn) in what is certainly not the largest private equity deal, but certainly going to be the most talked about deal.

There are many angles that people are exploring with regards to this deal. Some of these are: the deal structure and how in essence Daimler has actually paid about $145M to get rid of Chrysler, how if Chrysler gets revived under private hands it would be such a mega victory for private equity. Also how people are misconceived about private equity being just cut, slash and sell type of job where as in reality it is much more than that. Private equity is being compared to the leveraged buyouts of the 70s and the 80s and how people are misconceived that only financial types are running the show. Today's PE deals are mega-team works which involve not only the finance types, but also strategists, operations gurus and core engineers who have experience in the same field itself or a close enough field.

Even if you're not interested in private equity, but are interested in business, you have to check out and listen to this discussion online. It features Daniel Primack of PEHub who I have written about earlier, Josh Lerner, Professor of Investment Banking at Harvard Business School and Robert Reich, Professor of Public Policy at UC Berkeley.

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The world of Los Angeles private equity funds is a fairly rarefied world. The vast majority of these funds are organized as limited partnerships (LP) where the investors are principally institutional investors such as pension funds, banks, and high net worth individuals.The general partner (GP) identifies the opportunity, calls money from its lLP's (also called a drawdown or takedown) up to the amount committed and can do so at any point until the fund is liquidated. When an investment is liquidated, the GP distributes proceeds to the LP's in kind or in cash. The compensation from LPs to GP's consists of a management fee, plus a fraction of the profits called the carried interest.

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  • I'm Indyman
  • From Seattle, WA, United States
  • I am a Risk Management Consultant at KPMG. Before this, I was an Investment Associate at University Venture Fund in Salt Lake City, UT. My personal interests are in venture capital, private equity, technology, real estate, entrepreneurship, investing, stocks, india, patriotism, mumbai, hanoi, vietnam and life in the united states.
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