BusinessWeek – It was an epic showdown between legendary buyout king Henry R. Kravis and New Age hedge fund manager Stephen A. Feinberg — and Feinberg won. On Apr. 3, General Motors Corp. (GM ) announced that it would get about $14 billion over the next three years for selling a 51% stake of its highly profitable GMAC finance division to a group led by Feinberg’s firm, Cerberus Capital Management LP.<\/p>\n
Ever since, Wall Street has been buzzing over how the 46-year-old Feinberg snapped up a huge financial-services company for little more than its book value from Kravis, age 62. Kravis may someday look wise for having turned his back on a deal heavily laden with risk. But losing to Cerberus has to sting.<\/p>\n
A big battle between established buyout firms such as Kohlberg Kravis Roberts & Co. and scrappier hedge fund groups like Cerberus — named after the three-headed dog in Greek mythology that guards the gates of Hades — has been brewing for a while. In a 2004 speech to a few hundred private-equity investors and bankers, Kravis warned that hedge funds had little experience managing companies or “creating value.”<\/p>\n
Since then, Kravis has been forced to fend off Feinberg multiple times to buy companies. In 2005, a KKR group beat out Cerberus for troubled retailer Toys ‘R’ Us Inc. by paying $6.6 billion for it. In January, a Cerberus group picked up the grocery chain Alberston’s Inc. (ABS ) that KKR had been eyeing.<\/p>\n