Suggestions as to how to sell a company to BRK

[netnet]

I happened to be at a holiday party with an executive who works for a private company that is just the sort of business that BRK buys.  Does anyone have any suggestions as to how to introduce the company to Buffett?  (I am actually about to join a small IB, but this company/transactions is way bigger than anything they have done.  Further, neither I nor anyone has an engagement letter with the seller!)  Clearly this is a shot in the dark, but well worth firing even blanks.

[twacowfca]

Their phone number is listed.  First, check their website  :Do make sure that the company meets BRK 's criteria for acquisition.  Second, see if the price is cheap enough.  If the company plans to shop around for the highest bidder, forget it.

 

Finally, WEB doesn't generally pay a commission.  I assume you are planning to do this gratis.    :D

[shalab]

I am assuming he is a shareholder - so he will do fine.

[gfp]

Sounds like he is not a shareholder.

 

How big is the private company in question?

[calonego]

NetNet,

 

Please check your "My Messages".

[Guest longinvestor]

Just the fact that businesses of the right kind (the ones WEB likes) line up to want to get sold to Berkshire is quite a statement. Don't think there is any other company in this position. It has to be the most enviable position within industry. "They come looking for you".

 

I used to work for a very acquisitive company and the games they played being a suitor were funny. The upshot of the whole deal was that they often paid a dear price for the deal at the end of a bidding run, some of which involved the egos of the CEO wanting to prevent a competing Co/ CEO get it's hands on the acquiree. And the higher the price, the higher the probability was of destroying whatever value the aquired company brought because now you had to meet the white paper projections over the remaining quarters during the calendar year. They called this "aggressive" integration. Society lost.

 

Berkshire's enviable position amazes me and it is not an accident but a carefully nurtured culture. I am certain that in WEB's succession plan they are very mindful of not disrupting this welcoming culture to potential acquirees. I certainly hope this culture will long outlive WEB.

[Hershey]

Send a fax to corporate headquarters outlining the situation/facts re the business.  Offering price should not be in the fax, however, make sure the potential seller has a price to offer to Buffett.  BTW, Buffett will pay a commission.  He will respond very timely to the fax once he receives it. 

[mpauls]

Let me tag along if you get an invite to Omaha.

[netnet]

Thanks for all the suggestions.

 

 

Happy Holidays,

 

Nick

 

(Netnet)

[Mark Jr.]

This is one thing I've turned over in my mind for fun sometimes. Berkshire is probably the one company I would never want to sell my business to, because they by definition only pay rock bottom prices for their assets, why on earth would I want to sell to the lowest bidder?

 

If I had wrecked the place and WEB came along with an offer then ok. But as long as business is good, why sell at all? Especially to the one buyer who is going to pay you the least?

 

 

[lance2210]

This is one thing I've turned over in my mind for fun sometimes. Berkshire is probably the one company I would never want to sell my business to, because they by definition only pay rock bottom prices for their assets, why on earth would I want to sell to the lowest bidder?

 

If I had wrecked the place and WEB came along with an offer then ok. But as long as business is good, why sell at all? Especially to the one buyer who is going to pay you the least?

 

 

 

Because under WEB, you still get to run the show unless you cockup such as Rich Santuelli at Netjets or General Re - all you have to do is send your excess capital to Omaha. In comparison, with other acquiring companies want to install their management and procedures. You'll get a 12 month contract to consult but then you are on your own.

[Mark Jr.]

This is one thing I've turned over in my mind for fun sometimes. Berkshire is probably the one company I would never want to sell my business to, because they by definition only pay rock bottom prices for their assets, why on earth would I want to sell to the lowest bidder?

 

If I had wrecked the place and WEB came along with an offer then ok. But as long as business is good, why sell at all? Especially to the one buyer who is going to pay you the least?

 

 

 

Because under WEB, you still get to run the show unless you cockup such as Rich Santuelli at Netjets or General Re - all you have to do is send your excess capital to Omaha. In comparison, with other acquiring companies want to install their management and procedures. You'll get a 12 month contract to consult but then you are on your own.

 

So basically, I take my profitable company, which I own lock stock and barrel, sell it to BRK for the lowest possible price anybody would pay, and then stay on, keep running the place for somebody else,  and give them the excess capital? Yeah, that doesn't make a lot of sense to me either.

 

Why don't I just keep the business and the excess capital and not have a boss? If I like BRK so much, I can just buy the stock with my excess capital.

 

[omagh]

Many sales to Berkshire come from succession and estate planning concerns.  For succession, the founder can stay in place and continue with the management team that has been groomed from within the founder's company.  For estate planning, the founder's family has cash or BRK shares in exchange for the business.  At a certain age, founders may not just hold out for the highest price in order to keep their personal legacy in place -- these are social concepts beyond extracting the last ounce out of the business.  A founder with a few hundred million from Berkshire may not give a cr*p about "excess capital" and a "boss" and may be more concerned about providing wealth for his family or the charities and foundations that they are also involved in.

 

It sounds like you're on a single track with your line of questions.  Linear thinking only takes one so far.

 

-O

Why don't I just keep the business and the excess capital and not have a boss? If I like BRK so much, I can just buy the stock with my excess capital.

 

[netnet]

So basically, I take my profitable company, which I own lock stock and barrel, sell it to BRK for the lowest possible price anybody would pay, and then stay on, keep running the place for somebody else,  and give them the excess capital? Yeah, that doesn't make a lot of sense to me either.

 

In addition to providing liquidity for estate purposes, selling to BK gets you capital, if your business needs it.  BK does not pay rock bottom prices for private companies.  (Generally they pay a reasonable price, certainly not top dollar, but also not a distress price.  It's a different game buying private companies than buying in the stock market. The private company market is not the manic depressive stock market.)  Some business owners do not want the work of a lifetime, i.e. their business, to be (potentially) wrecked in a private equity deal. They want the business to be a legacy that lives.  On the other hand, some owners just want top dollar.

[stahleyp]

So basically, I take my profitable company, which I own lock stock and barrel, sell it to BRK for the lowest possible price anybody would pay, and then stay on, keep running the place for somebody else,  and give them the excess capital? Yeah, that doesn't make a lot of sense to me either.

 

In addition to providing liquidity for estate purposes, selling to BK gets you capital, if your business needs it.  BK does not pay rock bottom prices for private companies.  (Generally they pay a reasonable price, certainly not top dollar, but also not a distress price.  It's a different game buying private companies than buying in the stock market. The private company market is not the manic depressive stock market.)  Some business owners do not want the work of a lifetime, i.e. their business, to be (potentially) wrecked in a private equity deal. They want the business to be a legacy that lives.  On the other hand, some owners just want top dollar.

 

I totally agree. When you have "enough" there are more important things than getting top dollar. I believe Buffett said something like "if we buy your business, we'll display it like art in a gallary. If a private equity firm buys it, they'll put it in a porn shop." I'm sure my quote is off quite a bit, but I believe that's somewhat close.