THE $37 billion (including debt) takeover of Precision Castparts, a supplier to the aerospace and oil industries, is the biggest deal in Berkshire Hathaway’s 50-year history. The acquisition, announced on August 10th, fits the formula that has made Warren Buffett’s conglomerate such a success: the target is a well-run, easy-to-understand business with a strong market position. The deal got a good reception from investors. However, it may be getting harder for Mr Buffett to find suitable candidates for purchase.
Precision Castparts shares some similarities with another firm Mr Buffett bought recently, Detlev Louis, a German maker of motorcyclists’ clothing, for which it paid €400m ($454m) in February. Sales of motorbikes are growing briskly, just as orders for passenger jets are strong. Detlev Louis has a strong protective “moat” against competitors, in the form of its brand; in Precision Castparts’ case the moat consists of its technology and the large amount of capital it has invested in its plants.
With his latest deal, timing is vital too. Mr Buffett is betting that low...
from The Economist: Business http://ift.tt/1JeTpez
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