Episode summary
Cerberus Alumni Mold the Pentagon in Their Private Equity Image | Bloomberg Businessweek
Bloomberg Businessweek Daily
· · 9 min · Hosts: Carol Massar, Tim Stenovec · Guests: Caleb Melby
Summary
The episode centers on Bloomberg’s Big Take investigation into how Cerberus Capital Management and its co-founder Stephen Feinberg have moved deeper into defense, national security, and industrial policy. Caleb Melby says Cerberus, founded in 1992, has long owned companies tied to the Pentagon, but the firm has recently expanded into investments in critical minerals, supply chains, hypersonics, and communications infrastructure.
Melby argues that the old private equity model of buying, improving, and selling businesses is becoming less tidy inside Cerberus’s defense portfolio. He points to SubCom, a subsea cable company placed into a single-asset continuation vehicle after its valuation rose to $2.3 billion, allowing Cerberus to hold the asset longer than a typical fund cycle. He also says Cerberus owns Stratolaunch, which is helping test hypersonic technology, and another company involved in efforts to build an AI-native 6G network.
The conversation also focuses on Feinberg’s government role. Melby says Feinberg brought four former Cerberus colleagues into the Defense Department, where they now occupy important positions, including the economic defense unit and the office of strategic capital, which has a $200 billion lending budget. The episode frames that overlap as a central issue: Cerberus is investing in the same national-security priorities that Feinberg is now helping shape from inside the Pentagon.
Key takeaways
- Caleb Melby says Cerberus is increasingly aligned with Pentagon priorities, including critical minerals, supply chains, hypersonics, and communications technology.
- Melby says Cerberus put SubCom into a single-asset continuation vehicle, extending ownership of an asset whose valuation rose to $2.3 billion.
- Melby says Stephen Feinberg brought four former Cerberus colleagues into the Defense Department, including people running the economic defense unit and the office of strategic capital.
- The episode argues that Cerberus’s defense strategy is not new, but it is becoming more powerful as Feinberg’s public and private roles overlap.
- Melby says Cerberus could reappear near the top of defense contractor rankings as its 2024 acquisitions filter through government data.
Notable quotes
“Cerberus has been in this business for a few decades now and in recent years basically since the early 2000s Steve Feinberg who has a personal interest in national security and defense and spycraft”
“They continue to operate in acquiring companies that contract with the Department of Defense including some new big ones including M1 Support Services which services aircraft”
“They'll be able to hold on to that asset through their funds for longer. They really care about it and they're really interested in it”
“He's created a whole team within the department that includes these Cerberus guys”
“the US is behind in hypersonic weapons and hypersonic technology. Cerberus owns Stratolaunch, one of the premier companies for testing hypersonic technology in America”
How the episode opens
Some pretty big earnings. We're talking about Meta, Microsoft, and Qualcomm. We're going to be all over them.
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Again, just go to bloomberg.com/askradio. And then, of course, listen to us. Watch us.
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Wall Street time.
Bloomberg Audio Studios. Podcasts, radio, news. — You're listening to Bloomberg Business Week with Carol Massar and Tim Stenovec on Bloomberg Radio. — It's today's big take. It's one of the most read stories on the Bloomberg terminal. It's a Business Week deep dive into the Department of Cerberus.
Yeah, like you know this firm. It's a financial firm. — Paying attention during the financial crisis, then you know this firm.
You remember them from the auto bailout and takeover of some of the auto companies. Deputy Defense Secretary Stephen Feinberg wants America's war machine to get cozier with companies. The private equity firm H.I.G.
Capital founded is building a constellation of next-generation businesses to answer the call. As we mentioned, it is among our most read. It is a Bloomberg Big Take.
Here with more on his reporting. It is a very deep dive. Bloomberg News investigative reporter Caleb Melby, he joins Tim and me in our Bloomberg Interactive Brokers studio.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private equity
- pentagon procurement
- defense policy
- national security
- investigative reporting
Companies and tickers mentioned
- Cerberus Capital Management
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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