As the Essays note, Berkshire is unusual in several ways. These include the diverse range of businesses that it controls or in which it holds a significant ownership interest, its large proportion of non-controlling equity held long-term by individual shareholders, and its no-dividend pattern. These characteristics—plus the enduring management success of its controlling shareholders—may well be linked to the skeptical voice evident in the Essays.
Consider first how the Essays recount the process through which Berkshire acquired Scott Fetzer. A “major investment banking house” had undertaken to sell it but failed despite offering Scott Fetzer “widely.” Learning of this failure Mr. Buffett wrote Scott Fetzer’s CEO (whom he had never met), expressing interest, and “within a week we had a deal.” But “[u]nfortunately, Scott Fetzer’s letter of engagement with the investment bank provided it a $2.5 million fee upon sale, even it had nothing to do with finding the buyer.” (Essays at 217).
To be sure, this account may slight the investment bank’s contribution because its unsuccessful marketing effort preceded Mr. Buffett’s awareness of Scott Fetzer as an acquisition target. Nonetheless the incident exemplifies the Essays’ skepticism of the value of external intermediaries and deal-facilitators, at least most of the time. Instead, identifying acquisition targets and determining the terms on which a deal might be possible can be handled internally and more simply. Read More