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Speaker 1: Some pretty big earnings. We're talking about Meta Microsoft and Qualcom.

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Speaker 1: We're going to be all over them. We'd also love

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Speaker 1: analysis and thoughts from some of the smartest minds. When

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Speaker 1: it comes to Meta Microsoft and Qualcom, we'll be breaking

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Speaker 1: them down going through them again. Just go to Bloomberg

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Speaker 1: dot com, slash Ask Radio, and then of course listen

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Speaker 1: Originals and YouTube. That's all coming your way at four

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Speaker 1: pm Wall Street Time, Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: You're listening to Bloomberg BusinessWeek with care gerol Master and

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Speaker 2: Tim Steneveek on Bloomberg Radio. It's Today's Big Take. It's

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Speaker 2: one of the most read stories on the Bloomberg terminal.

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Speaker 2: It's a BusinessWeek deep dive into the department of Cerberus.

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Speaker 1: Yeah, like you know this firm. It's a financial firm.

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Speaker 2: If you're paying attention during the financial crisis, then you

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Speaker 2: know this firm.

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Speaker 1: You remember them from the auto bailout and takeover of

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Speaker 1: some of the auto companies. Deputy Defense Secretary Stephen Feinberg

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Speaker 1: wants America's war machine to get cozier with companies. The

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Speaker 1: private equity firm he co founded is building a constellation

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Speaker 1: of next generation businesses to answer the call. As we mentioned,

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Speaker 1: it is among our most read It is the Bloomberg

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Speaker 1: Big Take here with more on his reporting. It is

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Speaker 1: a very deep dive. Bloomberg News investigative reporter Caleb Melby.

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Speaker 1: He joins Tim and me in our Bloomberg Interactive Brokers studio.

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Speaker 1: Quite a mission and missive, I should say tell us

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Speaker 1: about first of all, what for those who might not

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Speaker 1: know what Cerberus is, But I believe that the Bloomberg

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Speaker 1: audience knows. But remind us kind of their history and

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Speaker 1: what the up to now.

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Speaker 3: Yeah, private equity and alternative asset manager founded in nineteen

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Speaker 3: ninety two by Steve Feinberg, who is the subject of

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Speaker 3: this piece. Cerberus has been in this business for a

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Speaker 3: few decades now, and in recent years, basically since the

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Speaker 3: early two thousands, Steve Feinberg, who has a personal interest

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Speaker 3: in national security and defense and spycraft, has really started

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Speaker 3: to push them into investments that contract with the Department

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Speaker 3: of Defense and are otherwise involved in what we might

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Speaker 3: otherwise call the national security space, so critical minerals, supply

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Speaker 3: chain stuff like that.

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Speaker 2: I don't typically think of private equity firms as defense contractors.

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Speaker 2: Explain how Cerberus got there.

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Speaker 3: Yeah, so they actually appeared for many years on the

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Speaker 3: government's list of top one hundred contractors to the Defense

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Speaker 3: Department through their ownership of dine Core. Dine Core was

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Speaker 3: the largest services firm in Afghanistan. They did things like

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Speaker 3: trained police forces, build barracks in similar activities. They continue

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Speaker 3: to operate in acquiring companies that contract with the Department

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Speaker 3: of Defense, including some new big ones including and One

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Speaker 3: Support Services, which services aircraft and is also among the

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Speaker 3: largest contractors to the Defense Department.

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Speaker 2: Private equity firms typically, well, I don't want to say

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Speaker 2: there's a typical way, but you know, some would argue

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Speaker 2: that there's a textbook sort of like depending if you're

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Speaker 2: doing a leverage buyout or not. But you make an investment,

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Speaker 2: you buy a company, you create efficiencies at the company. Yeah,

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Speaker 2: efficiencies can be a euphemism for laying people off, correct

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Speaker 2: or just best to be fair.

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Speaker 1: Ye.

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Speaker 2: Then they sell it, Yeah, and there's a return. Is

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Speaker 2: that Is that the model that Cerberus and Finberg are

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Speaker 2: using for defense companies.

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Speaker 3: It's a really interesting question, and we're starting to get

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Speaker 3: some clues about that for this new wave of companies

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Speaker 3: that they started acquiring and in some cases investing in

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Speaker 3: because they created a venture arm as well, going back

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Speaker 3: to about twenty eighteen. But one company we talk about

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Speaker 3: in looking in our stories called SubCom, which lays subc

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Speaker 3: fiber optic cables, very important right now with straight of

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Speaker 3: horror moves and everything else. They recently put Subcomm into

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Speaker 3: a single asset continuation vehicle. It's valuation sextupled over like

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Speaker 3: about eight years to two point three billion dollars, and

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Speaker 3: that will allow them to kind of circumvent that sort

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Speaker 3: of deal life cycle that you're talking about here. They'll

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Speaker 3: be able to hold onto that asset through their funds

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Speaker 3: for longer. They really care about it, and they're really

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Speaker 3: interested in it.

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Speaker 1: You know, safe to say fair, to say accurate, to

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Speaker 1: say that. We have an administration where the lines get

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Speaker 1: a little bit messy. So here you have someone who

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Speaker 1: created this firm, co founded this firm, and now he's

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Speaker 1: Deputy Secretary of Defense. Yeah, and then he's making investment Like,

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Speaker 1: tell us.

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Speaker 3: How that works? Yeah? Absolutely, fold all of that. So

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Speaker 3: coming into the Defense Apartment with Steve Finberg are four

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Speaker 3: other guys who have worked with him on these types

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Speaker 3: of investments. At Cerberus, He's created a whole team within

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Speaker 3: the department that includes these service guys. They're in several

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Speaker 3: very important roles. One is running the newly created Economic

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Speaker 3: Defense Unit, and the other is running the Office of

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Speaker 3: Strategic Capital, which has a two hundred billion dollar lending

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Speaker 3: budget to help onshore America's critical mineral supply chain and

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Speaker 3: other important investments. At the same time, over here, Cerberus

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Speaker 3: is in the process of acquiring, building and investing in

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Speaker 3: a lot of companies that do business with the Defense Department.

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Speaker 1: How does that work? And to be fair, just because

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Speaker 1: something looks like it's very connected doesn't mean that there's

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Speaker 1: anything going wrong. I want to be fair about that.

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Speaker 3: But yeah, so our story documents a few places where

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Speaker 3: things are overlapping. So the US is behind in hypersonic

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Speaker 3: weapons and hypersonic technology. Servers owns Strata Launch, one of

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Speaker 3: the premier companies for testing hypersonic technology in America, and

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Speaker 3: it's and they're playing part of the role to catch

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Speaker 3: up to that, so they're getting new government contracts in

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Speaker 3: real time. And the US has also been interested in

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Speaker 3: a while now for creating essentially what some people call

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Speaker 3: Huawei Killer, finding a way to onshore communications technology back

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Speaker 3: to the US and create an AI native six G network.

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Speaker 3: And Cerberus also owns a company that is in mesh

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Speaker 3: in this kind of syndicate and of companies, most of

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Speaker 3: them much bigger Navidia, Booz, Allen Hamilton that are working

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Speaker 3: with the Defense Department to develop that technology as an

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Speaker 3: America first technology.

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Speaker 2: One point that you make in your piece is that

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Speaker 2: this isn't really new to Cerberus, and at least in

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Speaker 2: terms of like being a defense contractor owning companies that

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Speaker 2: are defense contractors. In twenty ten, as your piece points out,

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Speaker 2: they were the eleventh biggest US defense contractor. Why has

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Speaker 2: it waxed and wane so much? Is it tied to

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Speaker 2: politics at all.

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Speaker 3: It's tied to some of their biggest defense contractors that

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Speaker 3: they hold. So dine Core when they bought it was

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Speaker 3: already gaining into a lot of trouble with the government,

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Speaker 3: allegations of over billing the government, allegations of shoddy work,

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Speaker 3: and Serberus bought it basically as like a classic turnaround effort,

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Speaker 3: can we clean up this company and everything else? But

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Speaker 3: US intervention in Afghanistan obviously went away, and instead of

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Speaker 3: winning new contracts, Dinecre lost a lot of contracts. So

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Speaker 3: you saw Dynecre's revenue fall and then you saw them

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Speaker 3: sell dine Core. And from what we can see, we

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Speaker 3: don't have twenty twenty five data from the government yet,

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Speaker 3: but from the companies they bought in twenty twenty four,

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Speaker 3: it looks very likely they'll start to reappear in those

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Speaker 3: lists in the future of the biggest contractors.

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Speaker 1: A lot of questions, there's a lot in here, and

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Speaker 1: I highly recommend everybody check it out online. But it's

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Speaker 1: just kind of fascinating to track and you do you

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Speaker 1: know there's questions of oversight.

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Speaker 3: Right, yeah, yeah, I mean really, what we have in

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Speaker 3: c Feinberg is a guy who cares a lot about

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Speaker 3: America's competition on the global stage and invested as a

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Speaker 3: private businessman to do that. And now he's leading with

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Speaker 3: a lot of the same strategies and a lot of

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Speaker 3: the same focuses, and a lot of the same people

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Speaker 3: on the other side of the equation.

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Speaker 1: Yeah, I just as they say, Department of Cerberus, but

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Speaker 1: within the.

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Speaker 2: Government, we barely scratch the surface. Check out the story.

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Speaker 2: It's got incredible visuals, yeah.

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Speaker 1: And a lot of information. It is the Bloomberg Big Take.

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Speaker 1: It is among the most read stories, and it is

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Speaker 1: by the amazing Calud Melby. He's Bloomberg News investigative reporter.

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Speaker 1: Joining us here in studio