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Elephant-Sized Acquisitions

Berkshire's preference for "elephant-sized" acquisitions — large deals that can deploy significant capital at good returns, often worth billions.

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Elephant-Sized Acquisitions

Elephant-sized acquisitions is Buffett's term for Berkshire's preference for large acquisitions that can deploy significant capital at attractive returns. These "elephants" provide the capital deployment needed for Berkshire to continue compounding.

Why "Elephants"

Capital Deployment Challenge

With Berkshire's massive capital base, small acquisitions can't move the needle:

  • BRK.A market cap: ~$1 trillion
  • Need deals large enough to matter
  • But still at attractive prices

"When you have a $500 million itch, you can't scratch it with mosquito bites."

Berkshire's Largest Acquisitions

Acquisition Year Size Status
Precision Castparts 2016 $32B+ Largest
BNSF Railway 2009 $26.5B Core holding
Burlington Northern 2009 (precursor) Combined
Marmon Group 2008 $4.5B Core holding
ISCAR 2006 $4B Core holding
Lubrizol 2011 $4B Core holding

Characteristics of Elephant Deals

Buffett's Criteria

  1. Right price — Won't pay a fair price for a wonderful business
  2. Wonderful business — Durable competitive advantages
  3. Right people — Managers who run it properly
  4. Long-term — No "exit strategies"

The See's Candy Test

Before any elephant:

  • Can they raise prices without losing customers?
  • Is the moat durable?
  • Will it earn above-average returns?

Post-Crisis Opportunity

2008-2009 Financial Crisis

The crisis created elephant opportunities:

  • BNSF acquired at distressed prices
  • Credit markets seized, forcing sellers
  • Buffett provided $15.5 billion in liquidity

"We were a significant source of liquidity during the crisis."

Famous Quotes

"Elephants-sized acquisitions are what we prefer."

"The market was a source of opportunity, not a constraint."

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