Berkshire Hathaway’s new chief executive, Greg Abel, has signalled a potential departure from Warren Buffett’s long-held hands-off operating model, following the announcement of a $6.8 billion acquisition of homebuilder Taylor Morrison.
Abel indicated in the deal announcement that he intends to consolidate Taylor Morrison with Berkshire’s existing site-built homebuilding operations, which are part of its Clayton Homes subsidiary. For six decades under Buffett, Berkshire Hathaway largely promised to leave acquired companies alone, allowing their executives to continue day-to-day operations without significant interference.
"We are excited to welcome Taylor Morrison into Berkshire’s portfolio, reflecting our long-standing commitment to housing, exemplified by Clayton Homes and our other building products businesses. Over time, we expect to unify our site-built homebuilding operations into a combined platform enabling us to deliver the dream of homeownership to more Americans," Abel stated.
Beyond Clayton, which specialises in manufactured homes but also includes a site-built unit, Berkshire also owns several other housing-related businesses, such as Benjamin Moore paint and Shaw Floors.
While the extent of Abel’s consolidation efforts across Berkshire’s dozens of companies – which include major insurers like Geico, manufacturers such as Precision Castparts, and retail and service firms like NetJets, Dairy Queen, and Helzberg Diamonds – remains unclear, he is widely known as a more active manager than Buffett.
"Given Greg’s strength as an operator it will be interesting to see if he does consolidate these units to get some greater scale and efficiencies," noted CFRA Research analyst Cathy Seifert.
Abel has overseen all of Berkshire’s non-insurance businesses since 2018, encouraging subsidiaries to cooperate where beneficial, though he had not made major operational changes until now. He became CEO in January, with Buffett retaining his role as chairman and largest shareholder.
Berkshire shareholders are likely to welcome Abel’s deal-making, especially given the Omaha-based conglomerate’s nearly $400 billion cash reserves. While this acquisition alone may not significantly impact Berkshire’s vast bottom line, it addresses investor questions regarding Abel’s capabilities in deal-making and investing.
Buffett himself praised Abel in a Monday interview with CNBC. "Greg did that faster than I could have done it, smoother than I could have done it, and I never talked to the CEO. He has launched," Buffett told CNBC.
Abel has previously led acquisitions while heading Berkshire’s massive utility division, though those would have been approved by Buffett. Now, Abel is making these decisions with advice from Buffett and the board.
"I think investors will cheer Greg’s foray into M&A as CEO. The purchase price seems rich given the current interest rate/macro environment," Ms. Seifert added.
Berkshire agreed to pay Taylor Morrison investors $72.50 per share in the all-cash deal. That represents a 24% premium over the company's previous closing price of $58.50. Shares of the Scottsdale, Arizona-based homebuilder jumped up near that purchase price on Monday while Berkshire's shares slipped 1%.
However, Raymond James analyst Buck Horne suggested in a research note that Berkshire could face competition from private equity firms or other potential buyers willing to offer more for Taylor Morrison before shareholders vote on the current offer.
"We would not be shocked if other players and/or private equity began to sharpen their pencils before the ink on this agreement is fully dry," Horne cautioned.
