Tags: warren buffett | berkshire hathaway | deputies | businesses

Buffett Tells Deputies to Supervise Newest Berkshire Businesses

Monday, 23 February 2015 07:54 PM

Warren Buffett has said he built Berkshire Hathaway Inc. into a sprawling business empire over the past five decades by delegating “almost to the point of abdication.” Lately, he’s been handing off even more responsibilities.

At least four of Berkshire’s recent acquisitions — including one on Friday of German motorcycle-equipment retailer Detlev Louis Motorradvertriebs GmbH and the deal for battery-maker Duracell announced in November — will be overseen by Buffett’s deputies.

The arrangements put a twist on the loose, trust-based culture that Buffett, 84, has championed at his company. For years, he’s had the chief executive officers of Berkshire’s dozens of businesses report to him directly. By delegating more, he’s freeing up his time and building capacity in an organization that will someday have to run without him.

“It makes eminent sense,” said David Rolfe, who manages about $11 billion including Berkshire shares at Wedgewood Partners Inc. “As he continues to get older, how much can the guy oversee himself?”

The decisions are being made on a case-by-case basis, according to a person familiar with the matter who asked not to be identified. Buffett didn’t respond to a message left with an assistant about how responsibility is delegated at Omaha, Nebraska-based Berkshire.

When Louis approached Buffett about a deal, for instance, the Berkshire CEO asked deputy investment manager Ted Weschler to fly to Germany to negotiate. Berkshire agreed to buy the retailer for about 400 million euros ($455 million) as it makes a renewed push to acquire European companies. Louis will keep its management team and report to Weschler, 53, the person said.

Owner’s Manual

Even with that arrangement, Berkshire is sticking to the principles that Buffett and Vice Chairman Charles Munger, 91, laid out long ago in the company’s “Owner’s Manual.” In it, they joke about “abdicating” responsibility to illustrate how they give managers lots of autonomy. That approach allows them to focus on picking stocks and finding acquisitions.

“Berkshire is not going to micromanage,” said Jim Zipursky, a managing director at Corporate Finance Associates in Omaha who helped introduce the German retailer to Buffett. “Warren’s team members are there as advisers.”

The Louis deal echoes Berkshire’s purchase of Charter Brokerage LLC, a logistics company that works with the petroleum and chemical industries. Berkshire said it was acquiring that business in December for an undisclosed sum. Buffett’s point man was his other investment manager, Todd Combs, 44, according to another person familiar with the matter.

Expanded Roles

Both acquisitions show how the deputies have expanded their roles, said Tom Russo, who oversees Berkshire shares at Gardner Russo & Gardner. Buffett hired Combs in 2010 and Weschler in 2011 to build stock portfolios and has said that one day they’ll manage all of the company’s investments, which included more than $100 billion in equities at Dec. 31.

“Warren has reached a point where he is now able to receive an idea and say to Ted or to Todd, ‘Go take a look,’” said Russo.

Buffett has called on other managers, too. After cutting the deal with Procter & Gamble Co. to buy Duracell for about $2.9 billion, he decided to fold the battery maker into Berkshire’s Marmon Group, a collection of industrial companies. The addition of a consumer brand to Marmon’s mostly business-to- business offerings was a fresh challenge for the unit’s CEO, Frank Ptak.

Learning Curve

“I’m about to enter a huge learning curve,” he said during a panel discussion this month, according to an article in Crain’s Chicago Business.

In December, Buffett bought two chemical-additives businesses from Weatherford International Plc and put them in Berkshire’s Lubrizol unit. Lubrizol CEO James Hambrick has said that part of his job is to find ways to reinvest funds generated by his business so that Buffett doesn’t have to. Berkshire’s cash pile rose to a record $62.4 billion at the end of September.

Buffett has highlighted how another of his deputies, Tracy Britt Cool, is helping him keep tabs on Berkshire’s expanding operations. While the subsidiaries have grown to employ more than 330,000 people collectively, headquarters staff still numbers about two dozen.

Cool, 30, is chairman of three of Berkshire’s smaller businesses and was named CEO of one of them, the Pampered Chef, in October. She also sits on the board of H.J. Heinz, the ketchup maker that Berkshire co-owns with 3G Capital.

“There are companies that I’ve never been there, and we’ve owned them a lot of years,” Buffett said in an interview in 2014. “Tracy is available to work on things that I probably should work on, but either am too busy or too lazy.”


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Finance
Warren Buffett has said he built Berkshire Hathaway Inc. into a sprawling business empire over the past five decades by delegating "almost to the point of abdication.
warren buffett, berkshire hathaway, deputies, businesses
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2015-54-23
Monday, 23 February 2015 07:54 PM
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