Year of Graduation
The Analysis of the Acquisition Premiums Paid by Warren Buffett for Public Companies
Strategic Corporate Finance
Buffett is famous for his unwillingness to participate in M&A beauty contests and overpay for his investments. Aimed at unraveling of Warren Buffett phenomenon we examine what can affect low price paid by Warren Buffett in M&A deals. We studied four factors, which are control premium, P/E multiple, target companies performance and market conditions. We found out that control premiums paid by Warren Buffett are lower than market average as well as target company P/E paid in M&A deals. We revealed that Buffett is unwilling to buy companies from glamorous industries and that his ability of obtaining above average returns can’t be explained by market tracing.