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Warren Buffett paid $1.7 billion for a company without ever meeting its founders, using the most important things in business
Warren Buffett paid $1.7 billion for a company without ever meeting its founders, using the most important things in business
Warren Buffett is known for his shrewd business practices and tough negotiation tactics. His company, Berkshire Hathaway Inc., is one of the largest conglomerates and investment companies in the world. It has acquired dozens of companies over the years with more than 75 wholly-owned or controlled subsidiaries. He owns shares valued at billions of dollars in companies such as Apple Inc., Amazon.com Inc., Mastercard Inc. and others.
Buffett accumulated his incredible portfolio and his company’s nearly $1 trillion value over decades of shrewd investments, smart acquisitions, and business acumen. Buffett, a longtime Nebraska resident, earned a business degree from the University of Nebraska-Lincoln in 1950. Nearly six decades later, he returned to the university to give a speech to the graduating class, talking about some of the most valuable things he has ever known. he learned as a young man and that helped propel him to where he is today.
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Buffett said there is nothing more important to understand than accounting.
“People ask me what they should study in business school,” Buffett said. “You have to understand accounting. It’s the language. It’s like being in a foreign country without knowing the language, if you’re in the business world and you don’t understand accounting.”
Not only is this a valuable tool for understanding the business world, but Buffet says it has made him “a lot of money.”
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Accounting is not an abstract principle used only in textbooks. Buffett tells how he used accounting to acquire the popular home manufacturing company Clayton Homes in early 2003.
Most acquisitions go through extensive due diligence, meetings, negotiations and other processes before an acquisition can occur. While much of this has probably yet to happen, Buffett gave a unique, billion-dollar example of how he used accounting to acquire the business.
“We agreed to pay US$1.7 billion for this. I made the deal over the phone, without ever meeting the people there,” Buffett said. “But I had seen enough reading annual report 10-Ks and 10-Qs.”
Buffett admits to using his accounting skills and an acquisition target’s Securities and Exchange Commission disclosures to analyze the company and learn about its quality based on decisions revealed in its records.
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While it is likely that a series of due diligence and meetings took place after these phone calls, the accounting allowed Buffett to make a multibillion-dollar decision to buy a company with minimal upfront work and still be confident that he is getting a good deal on his acquisition. .
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This article Warren Buffett paid $1.7 billion for a company without ever meeting its founders, using the most important things in business originally appeared in Benzinga. with
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