Berkshire Hathaway and GEICO: an M&amp;A case study

Calandro, Joseph; Dasari, Ranganna; Lane, Scott

doi:10.1108/10878570710833741

Cited by 5 publications

(8 citation statements)

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“…Although the G&D approach might be able to deliver a more accurate price expectation, it is still not yet used constantly in corporate M&A processes. It is a fact that if the due diligence is not carried out properly that approach is worthless (Calandro et al, 2007).…”

Section: The Manda Process and Synergiesmentioning

confidence: 99%

“…There have been different approaches investigating motives (Arnold & Parker, 2009;Berkovitch & Narayanan, 1993;Nguyen et al, 2012;Trautwein, 1990), synergies (Chatterjee, 2007;Damodaran, 2005;Ficery et al, 2007;Garzella & Fiorentino, 2014;Goold & Campbell, 1998;Kode et al, 2003), PMI (Adams & Neely, 2000;Angwin & Meadows, 2015;Datta, 1991;Joseph, 2014;Weber et al, 2012), evaluation methods (Ahammad & Glaister, 2013;Calandro et al, 2007;Kode et al, 2003), etc.. Referring to timing concepts, only speed has been investigated in more detail, stating that there is a limited time frame to realise synergies after closing (Angwin, 2004;Bert et al, 2003).…”

Section: Comparing To Literaturementioning

confidence: 99%

“…Even with regard to synergies, this approach can work, if synergies are characterised and understood correctly (Demirakos, Strong, & Walker, 2004). Calandro, Dasari, and Lane (2007) brought up the Graham & Dodd (G&D) valuation model to improve the odds of a merger success. Although the G&D approach might be able to deliver a more accurate price expectation, it is still not yet used constantly in corporate M&A processes.…”

Section: The Manda Process and Synergiesmentioning

confidence: 99%

See 2 more Smart Citations

The Crucial Role of Time in M&A Activities: An Inductive Exploration

Zadrazil¹,

Lehner²,

Losbichler³

2017

JMAA

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Mergers & acquisitions (M&As) are important strategic instruments, yet nearly half of all transactions fail, often resulting in disastrous write-offs and losses for corporations and financing institutions alike -despite promising prospects upfront. Applied research has been trying to find a "panacea" to prevent or at least predict M&A failure, investigating motives, synergies and performance. Despite the growing unease with the stationary explanatory models in literature, research has only marginally focused on the concept of time, with inquiries into market timing and integration speed. Yet other timing concepts have been neglected in concepts so far despite early empirical evidence for their existence. The purpose of this paper is thus to identify and elaborate on the importance of further relevant theories of timing. For this, and true to the exploratory nature of the topic, the authors have chosen a qualitative comparative case study design based on existing case reports which are investigated for narrations highlighting timing concepts. This study reveals six factors which have a crucial impact on the M&A outcome: time of acquisition, M&A duration in its entirety, M&A sequence, synergy chronology, frequency of acquisitions and time to step back. It contributes to theory and practice in outlining the careful attention that needs to be paid in planning in these factors to enhance the chances of a successful M&A transaction.

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Section: The Manda Process and Synergiesmentioning

confidence: 99%

Section: Comparing To Literaturementioning

confidence: 99%

Section: The Manda Process and Synergiesmentioning

confidence: 99%

See 1 more Smart Citation

The Crucial Role of Time in M&A Activities: An Inductive Exploration

Zadrazil¹,

Lehner²,

Losbichler³

2017

JMAA

View full text Add to dashboard Cite

show abstract

“…(Recently, this journal published a formal retrospective study of that case. [7]) Buffett has not, however, been immune to the occasional ''Deal from Hell.'' One such deal was the 1998 acquisition of the General Reinsurance Corporation (Gen Re).…”

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confidence: 99%

Assessing the risk of M&A: Bruner's Disaster Framework applied to Berkshire Hathaway's Gen Re Acquisition

Calandro¹

2008

Strategy &Amp; Leadership

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&A is widely considered to be risky, and yet Robert Bruner's Deals from Hell-M&A Lessons that Rise Above the Ashes (NY: Wiley, 2005) is likely the first book that attempts to systematically study and frame the root causes and risks of M&A failure.[1] Taking an innovative approach, Bruner realized that the types of initial misunderstandings, mistakes and miscalculations that are revealed after many notorious disastrous events occur can also be observed after management misadventures like failed acquisitions. To construct his innovative disaster analysis framework Bruner, a professor of finance at the University of Virginia whose academic specialty is M&A, first studied the causes of a variety of catastrophes such as:

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“…Recently, other retrospective case studies have shown how G&D valuation could be applied to M&A. [3] To add to the evidence, this case utilizes the modern G&D methodology to perform a detailed retrospective analysis of Lampert's 2004 Sears acquisition. Specifically, in this case study Sears is valued at the time of its acquisition and the base-case-valuation pattern is introduced.…”

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confidence: 99%

The Sears acquisition: a retrospective case study of value detection

Calandro¹

2008

Strategy &Amp; Leadership

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number of alternative investment firms, such as hedge funds, have been remarkably successful in the field of M&A. Consider, for example, Eddie Lampert of ESL Investments who acquired both Kmart and Sears, thereby becoming a force in US retail sales. Though the stock price has been volatile recently, Lampert has been so successful in these acquisitions that the shareholder value guru Alfred Rappaport observed, ''Former shareholders of Kmart are justifiably asking why the previous management was unable to similarly reinvigorate the company and why they had to liquidate their shares at distressed prices.'' [1] Clearly, the shareholders and management of Kmart that valued the firm on a ''distressed'' basis didn't truly appreciate the opportunity that Lampert saw in the deal. So how could Lampert's valuation have differed so significantly from theirs? The hypothesis of this retrospective case study is that, unlike many corporate executives and shareholders, Lampert is a Graham and Dodd (G&D) value practitioner and that methodology provided him a unique perspective on the Sears deal. The modern version of the G&D method assesses value along a unique continuum structure, which facilitates focused valuations of assets, earnings, competitive advantage, and growth in the context of one overall framework.[2] The comprehensive nature of that framework can reveal embedded elements of value, which at times can be underestimated or overlooked by practitioners of traditional forms of valuation. Such identification and exploitation of overlooked value could be a contributing factor to the M&A successes of alternative-investment firms.

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Berkshire Hathaway and GEICO: an M&A case study

Abstract: Warren Buffett, the Chairman and CEO of Berkshire Hathaway, has been a remarkably successful acquirer . . . Buffett generally does not overpay for acquisitions. ''

Cited by 5 publications

References 1 publication

The Crucial Role of Time in M&A Activities: An Inductive Exploration

The Crucial Role of Time in M&A Activities: An Inductive Exploration

Assessing the risk of M&A: Bruner's Disaster Framework applied to Berkshire Hathaway's Gen Re Acquisition

The Sears acquisition: a retrospective case study of value detection

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