In his 2020 Berkshire Hathaway Shareholder Letter, Warren Buffett discusses Berkshire’s ‘edge’ when it comes to making acquisitions. Here’s an excerpt from the letter:
Q4 2021 hedge fund letters, conferences and more
Buffett: Aside from the economic factors that benefited us, we now enjoy a major and growing advantage in making acquisitions in that we are often the buyer of choice for the seller. That fact, of course, doesn’t assure a deal – sellers have to like our price, and we have to like their business and management – but it does help.
We find it meaningful when an owner cares about whom he sells to. We like to do business with someone who loves his company, not just the money that a sale will bring him (though we certainly understand why he likes that as well).
When this emotional attachment exists, it signals that important qualities will likely be found within the business: honest accounting, pride of product, respect for customers, and a loyal group of associates having a strong sense of direction.
The reverse is apt to be true, also. When an owner auctions off his business, exhibiting a total lack of interest in what follows, you will frequently find that it has been dressed up for sale, particularly when the seller is a “financial owner.”
And if owners behave with little regard for their business and its people, their conduct will often contaminate attitudes and practices throughout the company.
When a business masterpiece has been created by a lifetime – or several lifetimes – of unstinting care and exceptional talent, it should be important to the owner what corporation is entrusted to carry on its history.
Charlie and I believe Berkshire provides an almost unique home. We take our obligations to the people who created a business very seriously, and Berkshire’s ownership structure ensures that we can fulfill our promises. When we tell John Justin that his business will remain headquartered in Fort Worth, or assure the Bridge family that its operation will not be merged with another jeweler, these sellers can take those promises to the bank.
How much better it is for the “painter” of a business Rembrandt to personally select its permanent home than to have a trust officer or uninterested heirs auction it off. Throughout the years we have had great experiences with those who recognize that truth and apply it to their business creations. We’ll leave the auctions to others.
You can read the entire letter here:
Berkshire Hathaway 2020 Letter
Read the full article here by Johnny Hopkins, The Acquirer’s Multiple
