6 Reasons Warren Buffett Will Buy Your Company

“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.”
– Warren Buffett

Dear reader, Chances are, you own a family business. Or are part of a family, in business. If you’re interested in selling it to Warren Buffett, here are 6 criteria you will need to meet.

1. Large Purchase
You will need at least USD 75 million in pre-tax earnings, unless the business will fit into one of Berkshire’s existing units, as a bolt-on acquisition. The larger it is, the greater the interest. As a company with a market cap of over USD 400 billion, Berkshire needs large acquisitions to move the needle.

2. Demonstrated Consistent Earning Power
Your business will need strong, stable cashflows. Future projections are of no use. Berkshire isn’t interested in “turnaround” or restructuring situations.

3. Earning Good Returns on Equity
Your business must put capital to good use. It must also employ little or no debt.

4. Great Management
You must have a world-class management team, that understands your business like no other. Management’s incentives must be aligned with shareholders. If management isn’t in place, Berkshire can’t supply it.

5. Simple Business
Your business and its business model must be simple to understand. If there’s lots of technology, Berkshire won’t understand it.

6. An Offering Price
Berkshire won’t waste its time, or that of yours, by talking, even preliminarily, about a transaction when price is unknown.

“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.’”
– Warren Buffett

Berkshire Hathaway doesn’t participate in auctions. It isn’t interested in hostile takeovers.

Stick to the criteria! Berkshire isn’t interested if you don’t meet them. If you do, however, Berkshire can promise complete confidentiality, and a very fast answer: “usually within 5 minutes”. Berkshire will also usually pay cash.

I strongly recommend reading Berkshire Hathaway’s 2014 Shareholder Letter in full.

Yours Sincerely,
Henry Chong