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:
- “Buffett moves fairly quickly when he’s ready to buy.”
- Most subsidiaries experience few major governance changes post-acquisition.
- Berkshire encourages a long-term focus, with a horizon of three to 50 years.
- CEOs believe they would be paid better at other companies.
- “Buffett lives up to his ‘delegation just short of abdication’ style…Most report having phone calls with him on a monthly or quarterly basis.”
- 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.