Greg Abel completes first deal as Berkshire CEO, making his mark as Warren Buffett's successor
Warren Buffett’s successor, Greg Abeljust completed his first acquisition as Berkshire Hathaway’s CEO. It’s the latest sign that he’s ready and willing to build on what Buffett built.
In a Friday press release, Berkshire said it has officially taken over Taylor Morrison for $8.5 billion in cash, a deal it first announced at the end of May.
Taylor Morrison is one of the nation’s biggest land developers and homebuilders; it made about $1 billion in pre-tax profits on around $8 billion of revenue last year, its latest annual report shows.
The homebuilder has now joined Berkshire’s stable of housing-related subsidiaries, which includes its real estate brokerage network, Berkshire Hathaway HomeServices, and its building-products businesses, such as Clayton Homes, MiTek, and Acme Brick.
“Berkshire is acquiring a best-in-class national homebuilder, led by an exceptional team and backed by a trusted reputation for customer experience,” Abel said in the May press release, echoing Buffett’s appreciation for market power, quality management, and a strong brand.
Abel said he expects to “unify our site-built homebuilding operations into a combined platform enabling us to deliver the dream of homeownership to more Americans.”
He shared an almost identical vision in Friday’s press release, signaling that he plans to marshal Berkshire’s homebuilding might to try to help tackle the affordability crisis that has prevented many Americans from becoming homeowners.
The press release laid out that Taylor Morrison’s brands — including Esplanade, Yardly, and Taylor Morrison Home Funding — will be combined with Berkshire’s site-built homebuilding operations, a set of 15 regional and local homebuilders that make up Clayton Properties Group.
Taylor Morrison’s CEO, Sheryl Palmer, similarly said the united operations will have “transformative” scale and reach.
Forging his own path
Abel took over from Buffett on New Year’s Day, marking the end of a nearly six-decade run for the legendary investor that saw him transform a failing New England textile mill into a $1 trillion conglomerate. Buffett remains chairman, and both men have said he provides input into every major decision at the company.
Regarding the Taylor Morrison deal, Buffett told CNBC’s Becky Quick in May: “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’s defining struggle for years has been figuring out smart ways to deploy Berkshire’s cash pile, which doubled in size to $380 billion in the two years ended March 31. That sum exceeds the market capitalization of many of America’s most valuable companies, including General Electric, Coca-Cola, and Procter & Gamble.
The bargain hunter has balked at buying stocks at historic highs, making acquisitions when private-market valuations are lofty and private equity firms present fierce competition, and even buying back Berkshire stock as it climbed to record highs.
The situation may finally be improving. Buffett recently told CNBC that he made the decision to invest in Alphabet last year. During the nine months ended March 31, Berkshire amassed a stake in Google’s parent company worth $18.5 billion today.
It bought another $10 billion of stock in a private placement in June, giving it a roughly $28 billion stake today, assuming it hasn’t altered the size of its holding in recent months.
That means Berkshire, which rarely makes big changes to its stock portfolio, took Alphabet from scratch to a top-five holding in under a year.
Berkshire also struck a deal to acquire OxyChem in October for nearly $10 billion from Occidental Petroleum, one of the larger holdings in its stock portfolio in recent years.
Alongside his efforts to allocate Berkshire’s capital, Abel has also started putting his top lieutenants to work. Michael O’Sullivan, Berkshire’s first general counsel, and Charles Chang, who’s poised to take over as finance chief from Marc Hamburg next year, briefly served as interim directors of the acquisition vehicle buying Taylor Morrison, along with Hamburg, an SEC filing shows.
It’s not totally clear how much influence Buffett has had on Abel’s early decisions. But it appears that between making an AI giant one of Berkshire’s largest holdings, acquiring a leading homebuilder, and enlisting O’Sullivan and Chang into the merger process, Abel is starting to make his mark.