Rabbit Hunting With Warren Buffett
In his 2010 annual letter to shareholders, Berkshire Hathaway Chairman and CEO Warren Buffett used the metaphor of his company's cash as an "elephant gun" to be used in his hunt for big companies to purchase. Ever since then, the news media has fixated on Berkshire Hathaway's hunt to bag that elephant to fuel its future growth. After all, how can an enormous company the size of Berkshire Hathaway grow even larger without swallowing up increasingly larger subsidiaries?
Buffett helped to finance half of the takeover of Heinz last spring, but people have widely agreed that the ketchup company wasn't the elephant Buffett was looking for. 3G Capital will run the company, and 3G is expected to make Heinz more profitable and then release it back into the wild.
Buffett has also fueled the elephant hunt rumors in his TV appearances, where he has tantalizingly revealed elephant near-misses -- that is, big potential acquisition deals this year that didn't get done.
While the world watches and waits for that elephant to come along, though, Berkshire Hathaway has been quietly growing another way: rabbit hunting.
Rather than using the metaphorical elephant gun to bring down the biggest game of all, the subsidiaries Berkshire Hathaway already owns have been quietly hunting their own small targets. Taken individually, most of these moves barely made the news outside of a company press release. But looking at all of the little moves together, you can see from the pattern that Berkshire Hathaway is growing just fine without any elephants.
Here are many of the small deals -- or "bolt-on" acquisitions -- that Berkshire Hathaway subsidiaries have made so far in the 2013 calendar year:
In August, MiTek Industries acquired Benson Industries. MiTek produces engineering products, software, and services for the building industry, while Benson designs, fabricates, and installs custom curtain walls for high-end commercial construction (including work on One World Trade Center.)
MiTek Industries also acquired Kova Solutions, LLC, in October. Kova produces and sells management and business operations software for the residential building industry.
MiTek Industries then acquired Cubic Designs in November. Cubic Designs adds customized, prefabricated structural steel products to MiTek's product portfolio.
Berkshire Hathaway HomeServices has launched its own real estate brand and recently juiced its growth by acquiring Florida's Elite Preferred Realty.
BH Media Group continues to grow its roster of local, mid-sized market newspapers, acquiring The Greensboro News and Record and The Tulsa World in February, The Roanoke Times in May, and The Press of Atlantic City in July.
MidAmerican Energy announced it was acquiring Nevada energy company NV Energy in May at a price of $10 billion. The deal was approved by NV Energy's shareholders in September and awaits regulatory approval.
Marmon, which already owns over 160 independent industrial and service subsidiaries of its own, announced in October that it will acquire the beverage dispensing and merchandising divisions of IMI plc in the U.K. for $1.1 billion.
TTI, an electronic components company, purchased Israeli company Ray-Q Interconnect in October. Ray-Q produces electrical interconnection solutions primarily for the military and aerospace industries.
Oriental Trading Company (itself just acquired in November 2012) bought toy and game maker MindWare in June.
Jewelry manufacturer Richline Group announced the acquisition of family-owned Honora in June, giving it a stand-alone brand known for its pearls.
Columbia Insurance Company (a part of Berkshire Hathaway's National Indemnity Company) bought Hartford Life International in July for $285 million, giving it $1.75 billion in assets under management from Hartford's former U.K. variable annuity business.
Justin Brands, best known for making boots in Texas, bought up Maine's Highland Shoe Company in May.
Berkshire Hathaway had previously owned only 80% of IMC International Metalworking Companies (better known as Iscar) and Buffett bought the remaining 20% from the founding family in May.
This list does not even include other Berkshire Hathaway investments in growth, such as new or expanded factories for manufacturing businesses like Shaw, Johns Manville, and Forest River, new solar and wind power projects announced by MidAmerican Energy, the new Berkshire Hathaway Specialty Insurance that was created from scratch, and a second location for Borsheims jewelry store in Nebraska.
In last year's annual letter, Warren Buffett told shareholders that the company had spent over $2.3 billion on 26 of these bolt-on acquisitions. For most of the deals above, the price tag for the new business wasn't revealed, but the MidAmerican deal to buy NV Energy for $10 billion surpasses last year's $2.3 billion all by itself.
If you are worrying that Berkshire Hathaway is not growing because you haven't seen Warren Buffett capture the elephant he's been so public about stalking, then you've been missing out on a much quieter growth story that's happening right under your nose.
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The article Rabbit Hunting With Warren Buffett originally appeared on Fool.com.Mike Steele owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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