During the 2019 Berkshire Hathaway Annual Meeting, Warren Buffett discusses Berkshire Hathaway’s approach to acquisitions, particularly in Europe, inspired by Eitan Wertheimer after the ISCAR purchase.
Buffett emphasizes targeting sizable, well-established businesses, ideally family-owned for decades, that align with Berkshire’s philosophy. He avoids auctions or deals driven solely by maximizing sale price.
While Todd Combs and Ted Weschler assist with screening opportunities, Buffett highlights the importance of disciplined decision-making, focusing only on acquisitions that truly benefit Berkshire.
He critiques the tendency of acquisition teams to act out of a need to justify their roles, reaffirming his commitment to making meaningful, thoughtful investments that enhance long-term shareholder value.
Here’s an excerpt from the meeting:
Buffett: Yeah, we — actually, it must have been after we bought ISCAR, Eitan Wertheimer convinced me that we should get more exposure in Europe. And he helped out in doing that. I went over; he arranged various meetings. We’ve had a lot of contact. It isn’t that they’re not aware, and we do hear about some.
But we do have the problem they’ve got to be sizable. I mean, if we do a billion-dollar acquisition, and it makes $100 million, or thereabouts, pretax — $80 million after tax — you know, it’s nice to add 80 million to 25 billion.
But if we really know the business and we’re sure we’re not going to have a problem with the people running it being motivated in the future and doing a similar job as to when they had their money in, it’s worthwhile. However, you can’t afford to spend lots of time doing that.
We gain something by having Todd (Combs) and Ted (Weschler) do some looking at things, screening them, and that sort of thing. But in the end, you want somebody — you want some family that’s held their business in Europe or in the U.K. for 50 or 100 years that can make a deal and that wants to do it with Berkshire.
I mean, if they’re looking to get the most money, if they want to have an auction, we’re not going to win, and we’re not going to participate because we’re not going to waste our time on it. If we form an acquisition crew, they’ll acquire something.
I mean, I’ve watched so many institutions in operation that, you know, if your job every day is to go to work and screen a bunch of things with the idea that you’re the strategic department or acquisition department, you’re going to want to do something.
I want to do something, but I don’t want to do something unless — (laughs) — Berkshire benefits by it — truly benefits by it — and generally, it’s of a size.
You can watch the conversation here:
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