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 $75 million of pre-tax earnings unless the business will fit into one of our existing units),
(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.”

There have been a variety of article recently suggesting what Warren should buy.  Examples:

• Buffett Takeover Criteria Includes General Dynamics: Real M&A
• Buffett equity stakes may point to future deals

Well intended as these articles are, Buffett has already said that he needs no advice on public companies.  Buffett is a price-sensitive buyer, and does not pay up for most acquisitions.

Beyond that, until he has bought more industrial companies, and float is scarce, he won’t buy other insurers, cheap as they are.  He has too much cash as it is.

If I were to write an article on this topic, I would look at the largest private businesses in the US, and even some mutual or government owned corporations like the TVA or NRUC, and try to analyze which of them would fit well in Berky.

Berky does best with private companies that want to preserve their culture.  With big private companies, it is less likely to preserve culture, so Buffett acquires a lot of special smaller firms.

But I don’t expect Buffett to buy what pundits are predicting.  It is not his way.