Berkshire Hathaway acquisition Criteria
I was @ the Berkshire Hathaway annual shareholder meeting in 2004. This is the from their annual report of that year -- note how anti-BS it is. So many of those damn consultant-types saying they know how to invest this / that... Look at these rules! They are simple. Question: Why do you think they won't participate in auctions? This is the antithesis of bureaucracy. I remember one of the questions was how Warren/Munger determine pay packages for their execs... and specifically if they use compensation consultants. Warren pontificated for a few minutes on how they like to keep things simple, on the back of a napkin, for example. Then, true to the act, Munger leans forward to the mic: "I'd rather throw a viper down my shirt than hire a compensation consultant." They seem to have a general disdain for consultants of almost any type. I'm in corporate America, and I see this: most consultants are 99% talk, and companies hire them to make it feel like they're doing something.
If you've read this far, you have an interest in the Berkshire Hathaway site, which is a testament to design simplicity, to information, to content. Remember when yahoo.com had a simple interface, like 1997? Google still does, now a couple months around the IPO... Here I say it: The start of the fall of google is when they allow advertising on their main page. It will mark the day when the pressures of public ownership trump commitment to the idea of pure search. Any bets on when this will be? I give them one cycle of earnings reports... some bright exec will say "we can meet numbers advertising on the main site..." and then the age of google's innocence is gone. But I digress.
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Berkshire Hathaway Inc.
acquisition Criteria
We are eager to hear from principals or their representatives about businesses that meet all of the following criteria:
(1) Large purchases (at least $50 million before-tax earnings),
(2) Demonstrated consistent earning power (future projections are of no interest to us, nor are "turnaround" situations),
(3) Businesses earning good returns on equity while employing little or no debt,
(4) Management in place (we can't supply it),
(5) Simple businesses (if there's lots of technology, we won't understand it),
(6) An offering price (we don't want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).
The larger the company, the greater will be our interest: We would like to make an acquisition in the $5-20 billion range. We are not interested, however, in receiving suggestions about purchases we might make in the general stock market.
We will not engage in unfriendly takeovers. We can promise complete confidentiality and a very fast answer -- customarily within five minutes -- as to whether we're interested. We prefer to buy for cash, but will consider issuing stock when we receive as much in intrinsic business value as we give. We don't participate in auctions.
Charlie and I frequently get approached about acquisitions that don't come close to meeting our tests: We've found that if you advertise an interest in buying collies, a lot of people will call hoping to sell you their cocker spaniels. A line from a country song expresses our feeling about new ventures, turnarounds, or auction-like sales: "When the phone don't ring, you'll know it's me."
If you've read this far, you have an interest in the Berkshire Hathaway site, which is a testament to design simplicity, to information, to content. Remember when yahoo.com had a simple interface, like 1997? Google still does, now a couple months around the IPO... Here I say it: The start of the fall of google is when they allow advertising on their main page. It will mark the day when the pressures of public ownership trump commitment to the idea of pure search. Any bets on when this will be? I give them one cycle of earnings reports... some bright exec will say "we can meet numbers advertising on the main site..." and then the age of google's innocence is gone. But I digress.
--------------
Berkshire Hathaway Inc.
acquisition Criteria
We are eager to hear from principals or their representatives about businesses that meet all of the following criteria:
(1) Large purchases (at least $50 million before-tax earnings),
(2) Demonstrated consistent earning power (future projections are of no interest to us, nor are "turnaround" situations),
(3) Businesses earning good returns on equity while employing little or no debt,
(4) Management in place (we can't supply it),
(5) Simple businesses (if there's lots of technology, we won't understand it),
(6) An offering price (we don't want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).
The larger the company, the greater will be our interest: We would like to make an acquisition in the $5-20 billion range. We are not interested, however, in receiving suggestions about purchases we might make in the general stock market.
We will not engage in unfriendly takeovers. We can promise complete confidentiality and a very fast answer -- customarily within five minutes -- as to whether we're interested. We prefer to buy for cash, but will consider issuing stock when we receive as much in intrinsic business value as we give. We don't participate in auctions.
Charlie and I frequently get approached about acquisitions that don't come close to meeting our tests: We've found that if you advertise an interest in buying collies, a lot of people will call hoping to sell you their cocker spaniels. A line from a country song expresses our feeling about new ventures, turnarounds, or auction-like sales: "When the phone don't ring, you'll know it's me."
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