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What You Can Learn from Warren Buffett’s Acquisition Style

This year, Warren Buffett made his biggest acquisition yet, purchasing Precision Castparts for approximately $32.5bn excluding its net debt. Precision Castparts manufactures parts for the aerospace industry and industrial pipes — the purchase signals another foray into industrial sector, 50 years after Buffett purchased Berkshire Hathaway.

The Guardian noted that Berkshire Hathaway’s colossal size makes finding meaningful acquisitions a challenge, which Buffett refers to as “elephant hunting.” Despite their increasing difficulty, Berkshire Hathaway’s long track record of successful acquisitions makes it a role model for companies.

Stanford Graduate School of Business Professor David F. Larcker and Stanford GSB researcher Brian Tayan unpacked Buffett’s acquisition style with a survey of about 80 Berkshire subsidiary CEOs. Here’s a summary of their findings:

  1. “Buffett moves fairly quickly when he’s ready to buy.”

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  1.  Most subsidiaries experience few major governance changes post-acquisition.
  1. Berkshire encourages a long-term focus, with a horizon of three to 50 years.
  1. CEOs believe they would be paid better at other companies.
  1. “Buffett lives up to his ‘delegation just short of abdication’ style…Most report having phone calls with him on a monthly or quarterly basis.”
  1. Berkshire exhibits a common culture “focused on honesty, integrity, long-term orientation, and customer service.” None of the CEOs expect Berkshire’s values to shift with Buffett retires.