Private Equity Acquisitions of Bankrupt Firms in the United States and Germany (PDF)

Diploma Thesis from the year 2005 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,7, LMU Munich, language: English, abstract: In early December, 2004, German newspapers reported the acquisition of bankrupt
automotive supplier Peguform GmbH, based in Bötzingen, by U.S. private equity
investor Cerberus Capital Management1. The transaction was announced 30 months
after Peguform, a company with more than 5,000 employees that recorded EUR 1.4
billion in revenues in 20032, had filed for bankruptcy. As it involved a large firm with
substantial importance for Germany's core automotive industry, this transaction
shone a spotlight on a sector of the private equity business that has not yet been
widely recognized in Germany: investments in bankrupt firms. While traditional
private equity buyouts of financially stable firms have become more and more
commonplace in Germany in recent years3, little attention has been devoted to the
niche of transactions at the corporate cycle's very end. In the United States, in
contrast, private equity funds investing in bankrupt firms constitute a well-established
part of the financial markets.
In this thesis, I aim at providing an overview of the most important aspects
concerning private equity acquisitions of bankrupt firms, both in the United States
and Germany. This comprises an analysis of the institutional framework for such
acquisitions, an investigation of the transaction process and the management of
acquired businesses, a closer look at the actual market for these transactions and its
development in recent years, and two case studies for practical insight and validation
of the findings.