The Faces of Cerberus: Private Equity Bets on Government Contracting

Cerberus Capital Management, one of the largest private equity firms in the United States, jumped into the government contracting industry with both feet by purchasing DynCorp International for $1.5 billion.

DynCorp CEO Bill Ballhaus
DynCorp CEO Bill Ballhaus

DynCorp President and CEO Bill Ballhaus said of the transaction, “I believe that under this partnership with Cerberus, DynCorp International will be able to build on our extensive heritage and successful performance to continue to achieve our growth objectives,“ adding, “this transaction is a major milestone for DynCorp International's continued leadership in serving our customers and supporting U.S. national security and foreign policy objectives.“

This recent acquisition represents a significant bet on the government contracting industry, following a mostly failed foray into the U.S. auto industry with its purchase of an 80% stake in Chrysler for $7.4 billion in 2007.  Cerberus’ stake in the company was worth $1.4 billion when it was sold to Fiat in 2009. Also, in 2006, Cerberus acquired GMAC, General Motors’ financial arm, for $7.4 billion, but by 2008, its liabilities exceeded its assets by at least $33 billion and GMAC received $5 billion in TARP bailouts in ’08.

Its two most recent major acquisitions have been DynCorp and Caritas Christi Health Care, the second-largest health insurance provider in New England.  So it looks like, in response to failures in the auto and lending industries, the firm is now betting on government contracting and healthcare.  Looks like it’s a good time to be in government contracting.

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