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Precision Castparts

A aerospace and power generation components manufacturer acquired by Berkshire Hathaway for $32 billion in 2016, making it Buffett's largest acquisition.

buffettaerospacemanufacturingacquisition2016berkshiremark-donegan

Precision Castparts

Precision Castparts Corp. (PCC) was a aerospace and power generation components manufacturer acquired by Berkshire Hathaway for approximately $32 billion in 2016. This was Buffett's largest acquisition to date.

Overview

PCC manufactured complex metal components for aerospace and power generation applications:

Segment Products
Aerospace Structures Airframe components, wing skins
Engine Products Turbine blades, compressor components
Power Generation Gas turbine components
General Industrial Specialty components
Metric Value
Acquired January 2016
Purchase Price $32 billion ($235/share)
CEO Mark Donegan
Pre-Tax Earnings ~$2B at time of acquisition
Employees ~30,000

Why Buffett Acquired PCC

Aerospace Moat

Buffett identified durable competitive advantages:

  • Extreme precision requirements — Parts must meet stringent tolerances
  • Certification barriers — Aerospace certifications take years
  • Customer relationships — Decades-long partnerships
  • Capital intensity — Requires massive investment in equipment

The $32 Billion Decision

"PCC makes the most intricate castings, machined parts and subassemblies for aerospace... It would be nearly impossible for a competitor to replicate PCC's capabilities."

PCC was the last major independent aerospace components company, making it a strategic asset.

Business Model

Aerospace Focus

PCC served both commercial and defense aerospace:

  • Commercial aerospace — Boeing, Airbus suppliers
  • Defense aerospace — Military aircraft components
  • Aftermarket — Replacement parts and services

Investment Castings

PCC's core competency was investment casting:

  • Melting metals and pouring into ceramic molds
  • Creating complex shapes impossible to machine
  • Heat treating and finishing for aerospace applications

Leadership

Mark Donegan

Mark Donegan was CEO of PCC from 2002 through the acquisition:

  • Built PCC into a premier aerospace supplier
  • Maintained operational excellence culture
  • Continued leading the business under Berkshire

Financial Performance

At Acquisition

Metric Value
Pre-Tax Earnings ~$2B
Return on Equity ~20%
Revenues ~$10B

Post-Acquisition

PCC's earnings were affected by:

  • Boeing 737 MAX production issues
  • Aerospace industry cycles
  • Later writedowns as industry conditions changed

Why It Fits the Moat Concept

Moat Type PCC Evidence
Technological Decades of casting expertise
Certification AS9100, Nadcap certifications
Capital Barriers Massive equipment investment required
Customer Relationships Long-term supply agreements
Switching Costs Re-qualifying alternatives takes years

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