...Presentation "Greetings, introducing names", we are going to present you today how the Berkshire Hathaway's acquisition criteria, operating principled and incentives work together to enforce hte values of responsibility and trust, which the Berkshire Hathaway model is predicated on. Our presentation outline includes the company's history; its unique approach in corporate governance; the secret of success in terms of acquisition using human resources wisely and effectively; the company's culture and conclusions. Initially, Berkshire Hathaway is one of the largest corporations in the world, which has significant minority hildings in American Express, M&T Bank, Procter & Gamble and IBM. It is known for its control by the investor Warren Buffet, who is the company's chairman and CEO. Berkshire Hathaway traces its roots to a textile manufacturing company established by Oliver Chace in 1839 and its business units employ over 250,000 employees. Being built on a model based on centralization of capital allocation decisions within corporate headquarters along with extreme decentralization of operating decisions within individual business units, Berkshire Hathaway showed an absolutely unique approach in corporate governance that works effectively. Despite the company has a considerable number of employees – over 250,000 individuals – managers, who oversee each unit, hold complete discretion over operating and capital decisions within their businesses, without obligation...
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...Berkshire Hathaway Berkshire Hathaway is a holdings company operated by Warren Buffett and Charles Munger. The company was founded in the 1800’s as a textile mill, and through a series of mergers became known as Berkshire Hathaway. Buffett took control of the company in the 1960’s and transformed it from a failing textile mill into a very successful holdings company. Berkshire Hathaway’s main investments are insurance companies such as GEICO, financial institutions such as Wells Fargo, goods companies such as Coca-Cola, and newspapers such as The Washington Post. The company’s financial situation is very strong, with increasing assets, equity, and revenue. The company has several large competitors such as The Allstate Corporation and BlackRock, Inc., as well as many others. However, Berkshire constantly outperforms not only its competitors, but also the market. Berkshire Hathaway is a holdings company that owns businesses in a variety of business activities. The company was founded in 1839 as a textile mill known as The Valley Falls Company and through a series of mergers became known as Berkshire Hathaway. Warren Buffett, the world’s greatest investor, started buying stock in the company in 1962 (Finkle 2010). By the mid 1960’s, Buffett owned enough of the company to change the management and basically take control of the company. Buffett realized that the textile industry was in a decline, so he used the company as an investment vehicle in addition to its textile...
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...Berkshire Hathaway Summary Facts about the Firm Berkshire Hathaway is an American multinational company based out of Omaha, Nebraska, USA & does not resemble the original company that Buffett had bought during the 1960’s. As of 2008, it was active in a variety of sectors, including insurance, regulated utilities & retailing. It is a holding company that manages a number of subsidiary companies belonging to the companies in these variety sectors. In 2008, the revenues of the conglomerate had become $81.7 bn. Warren Buffett has been at the helm of affairs since the inception & still remains the current Chairman and CEO. Charlie Munger, who is his best advisor and has been attached since early days to Buffett is the current Vice-Chairman. Analysis After gaining some experience in investing in firms, his first moderately successful venture being the Dempster Mill Manufacturing, Buffett bought Berkshire Hathaway, a textile mill which he was tracking from some years and then started looking out for other investing opportunities from the profits he made. His target over the years was to invest and acquire Insurance firms which would give him the extra cash needed to invest elsewhere. He carried on a spate of acquisitions over the years using the below acquisition criteria: - * Large purchases (at least $75 million of pre-tax earnings) * Demonstrated consistent earning power (sustainability of the business) * Businesses earning good returns on equity...
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...company profile for Berkshire Hathaway. This profile will include a brief history of Berkshire Hathaway's humble beginnings as a textile manufacturer, and subsequent diversification into a successful powerhouse holdings company that has spread it's risk into a variety of industries. These industries include insurance, utilities, building materials, furniture, jewelry, apparel and food companies. This paper will examine Berkshire's recent financial situation over the last 5 years. while touching on the CEO compensation package. The CEO behind this conglomerate, Warren Buffet, is considered to be one of the greatest investors of the 20th Century. Since Buffet took over in 1965, with his 20% majority share of ownership, Berkshire Hathaway, has grown to include over 50 firms under the corporate name. For the last 36 years , "The Oracle of Omaha" as Warren Buffet is known, has lived by a simple philosophy to invest in strong managed companies that produced good products but were inherently undervalued in the market. (Hoover's, 2013) This paper will also discuss Berkshire's competition for their major industries. Company Profile Berkshire Hathaway Inc. is an American multinational conglomerate holding company that has subsidiaries in the manufacturing, retail, and service industries and most importantly reinsurance companies. The company itself was founded by Oliver Chase back in 1889 in New Bedford, MA, under the name Berkshire Cotton Manufacturing...
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...Question 1: What is your interpretation of changes in stock prices of Berkshire Hathaway and Scottish Power Plc on the day of acquisition announcement? Answer: Deal announcement cause increment in share price of both Berkshire Hathaway and Scottish Power. The possible reason could be that the investor saw this deal as win-win situation for both the companies. The deal created value for both the company. Berkshire became more diversified and Scottish Power got good value from the deal. A possible reason for increase in share price of Scottish Power may be due to the fact investors saw this acquisition as good sign for Scottish Power and the deal taken as proof that Scottish power is in good condition. It is possible that the investors perceived potential synergies between PacifiCorp and MidAmerican. Question 2: Is the Berkshire's offer for Pacfic Corp was in line with the range of peer firm valuations? Answer: From Exhibit 10, we are able to see the following value for PacificCorp MV Equity as Multiple of: | Average Value | EPS | Book Value | | | | | 4,277 | 5,904 | 5090.5 | 4,308 | 5,678 | 4993 | In the case it is stated that the deal will take around 12 to 18 months to close. We will now calculate the PV of the deal. Risk free return rate as per case is 5.76% Beta for Berkshire is 0.75 The long term market return is 10.5% Cost of equity for Berkshire = 5.76+0.75(10.5-5.76) =9.32 % Using this...
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...Introduction Berkshire Hathaway Inc. is a holding company worth $358.2 billion. Berkshire Hathaway Energy, Burlington Northern Santa Fe, LLC (BNSF), McLane Company, Service and retailing and financial products are some of the segments the company insures. They provide businesses with insurance and protection of property and casualty risk. Some of the important acquisitions Berkshire Hathaway has had in the 21st century include The Pampered Chef, Fruit of the Loom, and Larson-Juhl in 2002; Clayton Homes and McLane Company in 2003; Business Wire, Forest River, Medical Protective Company, Applied Underwriters, and PacifiCorp in 2005; TTI, ISCAR, Russell Corporation, and Equitas in 2006; shares of Wrigley and GE in 2008; Burlington Northern...
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...Berkshire Hathaway and GEICO Insurance © 2001 Tim Glowa White Paper: Examining Berkshire Hathaway’s 1995 Purchase of GEICO Insurance Tim Glowa Tim@Glowa.ca September 12, 2001 © 2001 Tim Glowa September 12, 2001 -1- Berkshire Hathaway and GEICO Insurance Table of contents © 2001 Tim Glowa Executive Summary.................................................................................................... 3 Introduction................................................................................................................. 4 Review of the case: Berkshire Hathaway purchasing GEICO.................................... 4 Strategic Outcome....................................................................................................... 7 Finance........................................................................................................................ 7 Time Value of Money................................................................................................. 8 Assessment of the GEICO purchase ........................................................................... 8 Time value of money ................................................................................................ 11 An examination of the GEICO acquisition in hindsight........................................... 13 Limitations of Discounted Cash Flow ...................................................................... 15 Limitations of this Analysis ...
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...Regression Analysis of Verizon Communications, Berkshire Hathaway, and Wyndham Worldwide The stock market plays a pivotal role in the world today, bringing together investors with companies looking to raise funds. The government, organizations, and individual shareholder’s all have a stake in actively following and participating in the stock market. The problem that hinders common traders and professional investors alike becomes differentiating between the thousands of publicly traded companies in the U.S. alone to pick the best investments. By comparing three large, but very different companies to the market as a whole this paper will demonstrate how Beta can be used to measure the volatility of a stock. The three dependent variables will be acquired from historical stock returns from the communications conglomerate Verizon Communications (VC), Berkshire Hathaway Inc. (BRK-A) the multinational holding company best known its chairman Warren Buffet, and Wyndham Worldwide Corporation (WYN) one of the world’s largest hotel and resort chains. After comparing relevant statistical factors to each other a regression analysis will be done for each company comparing the excess market returns for each company (found by subtracting out the market free rate) to the market excess return. Table 1: Stock Return Statistics | Average Price/Share | Mean Return | Largest Gain | Largest Loss | Standard Deviation | Coefficient of Variation | VZ | $34.73 | 1.43% | 12.58% | -10...
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...J. P. Morgan and Berkshire Hathaway From 1820 to 1870, the Industrial Revolution brought innovations and growth to America’s economy. Of those breakthroughs rose the railroad and textile industries. With the railways falling into debt, John Pierpont Morgan was asked to intervene. Multiple railroads fell under his control due to his reorganization of the industry and his actions came to be known as “morganization.” Founded in 1889 as Berkshire Cotton Manufacturing Company, Berkshire Fine Spinning Associates became one of the largest textile industries in the world. It was later recognized by Warren Buffett who seized control of the company and used it for further investments. This essay focuses on the question of: what can be learned by examining Morgan’s consolidation of the railroad industry and Berkshire’s astonishing growth? This era marked a shift to powered, special-purpose machinery, factories and mass production. Industrialization in America involved three important developments: the harnessing of electricity, improvements to the industrial process including the acceleration of production, and lastly the expansion of transportation. An improved transportation system was crucial for raw materials to reach the factories and manufactured goods to reach consumers. Morgan was fixated on the restructuring of railways and began by proposing agreements between major lines. “Oppressed by debt and overbuilding, more than a third of the country’s railway trackage fell into...
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...acquisition of PacifiCorp increased Berkshire Hathaway’s intrinsic value. Background or Historical Perspective: Berkshire Hathaway was incorporated in 1889 as Berkshire Cotton Manufacturing and later merged with Hathaway manufacturing in 1955. In 1965, Warren Buffett and some partners gained control of Berkshire Hathaway. Buffett invested in companies from various sectors of the market ranging from insurance to clothing apparel. Over the next few decades since Buffett originally acquired Berkshire Hathaway, Buffett became famous as investment genius with an unbelievable growth percentage of 24%. Class A shares of Berkshire Hathaway traded at $102 in 1997 to $85,500 in 2005. Analysis and discussion: The stock price jump for both Berkshire Hathaway and Scottish Power plc means that investors are very optimistic about this move. The increase in Berkshire Hathaway’s market value of $2.55 billion means that the intrinsic value of PacifiCorp will add value to Berkshire Hathaway. The value of PacifiCorp ranges from $6.25 Billion to the $9.4 Billion paid to acquire PacifiCorp. The only aspect of this acquisition is why did Berkshire Hathaway pay so much for this acquisition? The only reason why Berkshire Hathaway would pay so much for an acquisition is that Buffett perceive PacifiCorp’s intrinsic value as more than $6.25 Billion. Berkshire Hathaway has performed extremely well with an annual growth percentage of 24%. By comparing Berkshire Hathaway’s Class A stock with the S&P...
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...What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2.17-billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp? The changes of the stock price for Berkshire Hathaway and Scottish Power plc is due to the fact that the deal between these two companies created value, indeed it created value for the buyers and the sellers because for example thanks to this acquisition Berkshire is more diversified. Moreover, we can also say that the stock prices of Berkshire Hathaway and Scottish Power plc changed due to the variety of products produced by these two companies, for example Berkshire Hathaway has eight types of different products, from insurance to wholesale distributing. The fact that this deal creates value for both buyer and seller prove that the overall market approves it. The $2.17 billion gain in Berkshire’s market value of equity implied that the intrinsic value of PacifiCorp was good. Indeed according to these calculations we can say that its value and its competitors ones are in the same range (see exhibit 9). $2.17 billion312,18 million =6.95 This is what Berkshire is willing to pay for each share of PacifiCorp. 5.1 bilion312.18 million=16.30 6.95+16.30=$23.25 2. How well has Berkshire Hathaway performed? How well has it performed in the aggregate? What about...
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... His Masters of Science in Economics was completed at Columbia University.... [tags: Berkshire Hathaway] 338 words (1 pages) FREE Essays [view] Warren Buffet - Warren Buffet Warren Buffet of Berkshire Hathaway and His Investment Strategy Warren Buffet is arguably the most successful investor of all time. His initial investment of $105,000 in the beginning, ultimately grew into a $16 billion dollar fortune made from his trading company, Berkshire Hathaway. If you had invested $10,000 in Berkshire Hathaway when he took over the company in 1965, it would be worth $22,000,000 today. Warren’s stockpicking prowess however, is what he is know for and is also why Berkshire Hathaway has had a returning average of 24% a year for the last three decades.... [tags: GCSE Business Marketing Coursework] :: 3 Sources Cited 551 words (1.6 pages) $14.95 [preview] Case Study of Warren E. Buffet - Case Study of Warren E. Buffet In 1995 Berkshire Hathaway has made a bid for the shares of GEICO. This report reviews the offer made by Warren Buffet and will try to prove that the acquisition of GEICO will serve the long-term goal of Berkshire Hathaway and the bid price was appropriate. Furthermore, it will explain what may have caused for the share price increase for Berkshire Hathaway at the announcement of GEICO’s acquisition. Would the GEICO acquisition serve the long-term goals of Berkshire Hathaway.......
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...BERKSHIRE HATHAWAY PURCHASES GEICO WARREN BUFFET Executive Summary Berkshire Hathaway has made a bid for the remaining portion of GEICO stock. This report reviews the offer initiated by Warren Buffett. The details of this report include: • Valuation of GEICO stock. The $70 offer made by Warren Buffett and Berkshire Hathaway includes a 26% premium over the current GEICO stock price of $55.75. This report attempts to determine a range of appropriate stock prices for GEICO. Using the Gordon dividend discount model, along with historical dividend information and projections by Value Line, we estimate the value of GEICO stock in the range of $58 to $80. A review of historical growth rates in GEICO dividends also lends credibility to the investment’s future potential. • Review of Warren Buffett’s investment record. While our analysis lends credence to the bid price of $70 per share for GEICO, we also examine the historical record of Warren Buffett. Buffett’s investment success may add to shareholder’s comfort, as his track record is remarkable when compared to broader market results. • Buffett’s investment philosophy. A letter to shareholders gives us a unique look at Buffett’s considerations for investing. By reviewing his checklist, we attempt to gain insight as to why such a premium is included in the GEICO offer. • Other issues. Buffett’s position on GEICO’s board of directors may shed light on the amount of information Buffett had about the future prospects of GEICO. At first...
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...WARREN BUFFET The Omaha Miracle 12/ 16/ 2008 Business English 1 WARREN BUFFETT The Omaha Miracle Table of Content I III IV IV Biography / Historical Timeline Berkshire Hathaway Buffet’s Principals Sources 12/ 16/ 2008 Business English 2 WARREN BUFFETT The Omaha Miracle Warren Buffett was the richest man in the world 2008. 12/ 16/ 2008 Business English 3 WARREN BUFFETT The Omaha Miracle He’s a self-made man with a fortune of around $62 billion. 12/ 16/ 2008 Business English 4 WARREN BUFFETT The Omaha Miracle Croatia’s GDP was actually $63 billion in 2008. 12/ 16/ 2008 Business English 5 WARREN BUFFETT The Omaha Miracle He lives in the same house in Omaha, Nebraska that he bought in 1958. 12/ 16/ 2008 Business English 6 WARREN BUFFETT The Omaha Miracle But Mr. Buffett doesn’t live here… 12/ 16/ 2008 Business English 7 WARREN BUFFETT The Omaha Miracle …he actually lives here. 12/ 16/ 2008 Business English 8 WARREN BUFFETT The Omaha Miracle Is this his car? 12/ 16/ 2008 Business English 9 WARREN BUFFETT The Omaha Miracle Well this is. 12/ 16/ 2008 Business English 10 WARREN BUFFETT The Omaha Miracle Like every American he’s also pretty much into sports and even sponsors an international tournament. 12/ 16/ 2008 Business English 11 WARREN BUFFETT The Omaha Miracle The Warren Buffett Bridge Cup to be exact. 12/ 16/ 2008 Business English 12 WARREN BUFFETT The Omaha Miracle ...
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...Case 2: Warren E. Buffett. Berkshire Hathaway Question 1: The possible meaning of the change in the stock price of Berkshire Hathaway on the day of the announcement is that the shares of GEICO were undervalued at a price of $55,75 and Berkshire Hathaway paid a $14,25 premium per share. However, even though Berkshire Hathaway paid $70 per share, that price was lower than the fair value of GEICO but the shareholders couldn’t turn the offer down. Consequently, Berkshire Hathaway increased it’s market value by $718 millions because the intrinsic value of GEICO was higher than the price it was sold for. The company had outstanding 1,177,750 shares and on august 25 BH share price changed by positive $609.60. At the end of the session, the price was $25,400. 1,117,750 * 609.60 = 717,956,400 gain. In addition, BH already owned 50.4% of GEICO. GEICO had on april 30 1995 a total of 67,889,574 shares outstanding. BH is buying 49.6% of the total outstanding shares: 67,889,574 * 49.6% = 33,673,229 shares Before the acquisition, BH had a value of Total shares * opening price 1,177,750*24,790.40= $29,196.89 million And GEICO had a value of 33,673,229*55.75=$1,877.28 million Resulting to the BH+GEICO = 29,196.89+1,877.28 = $31,074.17 million After the acquisition, BH had a value of Total shares*closing price 1,177,750*25,400= $29,914.85 million And GEICO had a value of 33,673,229*70=$2357.13 Resulting to the total BH+GEICO = 29,914.85+2357.13 = $32,271.98 million and...
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