One of the beauties of Buffett's acquisitions is that he almost always has been adept at playing
the value scale. Appraisers of privately held businesses make their living quantifying marketability premia and discounts. The same business, privately held, can be purchased for less than the market cap of its public twin, which is less still than what a synergistic or otherwise control-hungry buyer will pay.
Sometimes the public market over-reacts either way, of course - but all things equal there is, in this world, a private/public/synergistic pricing hierarchy (with further gradiations). Buffett frequently maximizes that spread through his purchasing process (no bidding; sellers motivated to Buffett's ownership tenants; some inside track, etc). We don't often see BRK tender offers, since these usually generate price levels further up the scale.
Another point - Buffett almost always leaves himself a value 'cushion' after the purchase. He's usually not the highest buyer on the value scale - there's a synergistic buyer one step up. So even though BRK makes buy-and-hold-forever acquisitions, when forever comes, as with Gillete or CapCities/ABC there's a small universe of synergistic or strategic buyers (P&G, Disney, etc) who will pay up, versus value to Berkshire. And that's true of most of the fully owned subs.
So I would look at any acquisition speculation through that kind of value-scale lens. He'll have to have an acquisition edge - pricing, not just ability - versus anyone else, and there will likely be a value 'cushion', meaning that somebody, somewhere could wring out additional synergistic value.
the value scale. Appraisers of privately held businesses make their living quantifying marketability premia and discounts. The same business, privately held, can be purchased for less than the market cap of its public twin, which is less still than what a synergistic or otherwise control-hungry buyer will pay.
Sometimes the public market over-reacts either way, of course - but all things equal there is, in this world, a private/public/synergistic pricing hierarchy (with further gradiations). Buffett frequently maximizes that spread through his purchasing process (no bidding; sellers motivated to Buffett's ownership tenants; some inside track, etc). We don't often see BRK tender offers, since these usually generate price levels further up the scale.
Another point - Buffett almost always leaves himself a value 'cushion' after the purchase. He's usually not the highest buyer on the value scale - there's a synergistic buyer one step up. So even though BRK makes buy-and-hold-forever acquisitions, when forever comes, as with Gillete or CapCities/ABC there's a small universe of synergistic or strategic buyers (P&G, Disney, etc) who will pay up, versus value to Berkshire. And that's true of most of the fully owned subs.
So I would look at any acquisition speculation through that kind of value-scale lens. He'll have to have an acquisition edge - pricing, not just ability - versus anyone else, and there will likely be a value 'cushion', meaning that somebody, somewhere could wring out additional synergistic value.
