Will Berkshire Hathaway Lower Its Buyout Standards?

Berkshire Hathaway (BRK/A) may be setting its sights lower as far as the size of a merger it would pursue.  Reuters has reported that Warren Buffett gave an interview to a Swiss newspaper called Finanz and Wirtschaft saying the company was primarily interested in large takeovers.  Buffett said they would happily buy things in the $5 billion to $20 billion range, although potential targets are rare.  Buffett did note that they were confident they would be able to conclude several larger transactions soon in the interview.

We just ran several buyout targets that we widened out to fit the bill for a "whale" of an acquisition on Monday.

If Buffett looks at smaller companies then he will have a lot more to choose from.  It is somewhat surprising that Buffett has not looked at the retail and commercial banking sector since there are so many with healthy balance sheets and surpressed prices due to a temporarily inverted yield curve.  He has also failed on his promise to go big into power generation operations, and there are perhaps 5 or 6 names he could easily approach in that sector.

The truth is that if Buffett stoops down into the $5 billion to $20 billion range then there will be many opportunities for him.  Perhaps the largest reason for looking at larger deals is that he is probably concerned that he will be one-upped in a higher bid for any deal he considers in that $5 billion to $20 billion range.

Regardless of his comments, he needs to remove T-Bills as his single largest public investment at the current time.  Being too picky and just sitting on the sidelines for too long can come across as indecisive, even if you have made yourself into one of the world’s richest men. 

Jon C. Ogg
May 9, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in any of the companies he covers.