As fans flock this weekend to Omaha, Neb. for Berkshire Hathaway’s annual shareholders meeting hosted by Chairman and CEO Warren Buffett, you may be wondering what all the fuss is about.
The answer: unique mystique. Buffett and Berkshire BRK.A, -2.94% BRK.B, -2.55% are distinct in the corporate world for a combination of unusual practices and styles that no rival matches.
Nor should any rival expect to match the Berkshire/Buffett model, which is a product of inimitable personality and circumstance. But being a “cafeteria Buffett” is possible: picking the best practices that suit. Many companies have emulated parts of the Berkshire model well and there are plenty of executives as talented as Buffett when it comes to investment savvy or managerial insight.
Two of my favorite Berkshire/Buffett oddities concern how they find acquisitions and how they approach price.
To generate acquisition opportunities, they rely on their professional network. They put the word out that they are always open to acquisition opportunities within specific parameters and then look for business relationships to tee them up.
On price, they almost never haggle over but rather put their first-and-best offer up front. They know what things are worth and know what they are willing to pay. They are also perfectly happy to walk away from any opportunity and part friends.
A favorite story concerned a company called Tech Data, which reached out to Berkshire during its go-shop period for another merger. Berkshire made a proposal, Tech Data countered for more, Berkshire said no and walked, and the company was ultimately acquired by its initial pursuer.
For my book, Berkshire Beyond Buffett: The Enduring Value of Values, I collated the sources and pricing of Berkshire Hathaway acquisitions and present updated versions through the most recent acquisition, of Alleghany, in the charts below. Think about this the next time you read about another Berkshire buy.
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Seller overture (in a pure sense; if it was the owner’s idea but prompted by other links, the deal is listed under those links): |
Fechheimer Bros.; Helzberg’s Diamond Shops (walking down the street in New York City); Ben Bridge (Ed Bridge called, after talking with Barnett Helzberg); MiTek (subsidiary chief executive officer sent package in mail with parent company’s permission);
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Business relationship |
Gen Re (Ronald Ferguson); U.S. Liability (Ferguson); Applied Underwriters (Ajit Jain did deal with owners); Dairy Queen (banker introduced a year before Rudy Luther died; then done quickly); Benjamin Moore (Robert Mundheim); NetJets (customer; Richard Santulli called); Shaw Industries (after discussing aborted insurance deal); McLane (Byron Trott, Goldman Sachs); The Marmon Group (seeds date to 1954 when Buffett met Jay Pritzker), Alleghany (Joe Brandon) |
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Friend/relative |
NICO (Jack Ringwalt); Central States (Bill Kizer); Kansas Bankers Surety (at niece’s birthday party); H. H. Brown Shoe (John Loomis golfing with Frank Rooney); XTRA (Julian Robertson); TTI (John Roach, friendship seemed to arise with Justin), MidAmerican (Walter Scott, Jr.) |
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Berkshire overture |
Scott Fetzer (wrote CEO amid waning takeover contest); Jordan’s Furniture (implicitly, asking Blumkins, Bill Child, and Melvyn Wolff); Johns Manville (announced deal broke off; Berkshire stepped up); Fruit of the Loom (made offer in bankruptcy), Precision Castparts (was an investor and reached out in the course of Precision’s regular investor outreach activities) |
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Stranger |
CORT (acquaintance sent fax); FlightSafety International (shareholder of both wrote Robert Denham), Justin (someone faxed about co-investing proposal). |
Pricing of Berkshire Hathaway acquisitions
| Alleghany | Berkshire offered price. Seller asked for an increase. Berkshire said no. |
| Benjamin Moore | Berkshire offered price. No counter. |
| BNSF | Berkshire offered price. Seller asked for more. Berkshire said no. |
| Clayton Homes | Berkshire offered price. Board had CEO ask for more. Berkshire said no. |
| CTB | Berkshire offered price, and actually went down a quarter-point for adviser fees. Berkshire said that’s it. |
| Dairy Queen | Berkshire offered price. No further discussion. |
| Fruit of the Loom | Berkshire offered single bid in bankruptcy at end of auction process and won. |
| Garan | Seller sought price above $60 a share. Berkshire offered $60 and that was that. |
| Gen Re | Buffett proposed the exchange ratio and Gen Re went along. |
| Johns Manville | Berkshire offered price. Board tried to get more. Berkshire said no. |
| Justin | Berkshire offered price. Another bidder dropped out. No further discussion. |
| Lubrizol | Berkshire offered price. Seller tried to get more. Berkshire said no. |
| Precision Castparts | Berkshire offered price. Seller asked for an increase. Berkshire said no. |
| Shaw Industries | Berkshire offered price. Board/banker asked for more. Berkshire said that’s our best price. |
| XTRA | Berkshire offered $59 a share. Seller asked “Is that your best offer?” Berkshire said it was. |
More information:
Berkshire Hathaway Chairman and CEO Warren Buffett is known as the Oracle of Omaha, and each year, investors gather to hear his wisdom at the company’s annual shareholder meeting.
Buffett took control of Berkshire, which was then a failing textile company, in the mid-1960s. Under his leadership, Berkshire has grown into one of the world’s largest conglomerates. As a result, he and other longtime shareholders have become extremely wealthy.
Berkshire Hathaway has in some ways set the standard for lavish annual meetings. The daylong, carnival-like atmosphere features comedy skits, disco balls, music, celebrities like Bill Gates, and even dancing characters from the various companies in the BH portfolio, including the GEICO gecko. Live online coverage of the proceedings provides real-time updates for those unable to attend.
All it takes is a single share to be considered a stockholder and join the party. You can own either the company’s Class A shares (BRK-A), which traded at $519,799.90 per share as of April 13, 2022, or the more affordable Class B shares (BRK-B), which ended the week on the same date at $346.22.
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