Greg Abel's First Big Acquisition for Berkshire Hathaway Shows Him Following in Warren Buffett's Footsteps
Written by Adam Levy for The Motley Fool -> Greg Abel just made his first major acquisition as CEO of Berkshire Hathaway. The current industry down cycle presented a great long-term opportunity. The move could have implications for Berkshire's marketable equity portfolio. War
Greg Abel just made his first major acquisition as CEO of Berkshire Hathaway.
The current industry down cycle presented a great long-term opportunity.
The move could have implications for Berkshire's marketable equity portfolio.
Warren Buffett transformed Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) from a failing textile company into a massive trillion-dollar conglomerate over his 60 years as CEO. At the core of the transformation is an investment philosophy rooted in buying excellent companies at a fair value and holding them for the long run, preferably forever.
In the last few years of his tenure as CEO, Buffett found few great investment opportunities, allowing Berkshire's cash pile to grow to nearly $400 billion. Greg Abel has shown a willingness to start deploying relatively small chunks of that capital in his first few months as CEO, and he recently agreed to a deal that would put about $8.5 billion of Berkshire's cash to work in an acquisition that follows in Buffett's footsteps.
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On May 31, Berkshire Hathaway announced plans to acquire Taylor Morrison Home (NYSE: TMHC) for approximately $6.8 billion in cash. When you add the company's existing debt, the deal's enterprise value is $8.5 billion. (Berkshire will likely retire that debt with its cash pile.)
Abel's decision to buy the homebuilder comes at a time when the industry is facing challenges due to high mortgage rates and expensive housing prices. That's led to bargain-priced valuations for some industry stocks, and Abel wasn't afraid to pounce on the opportunity.
