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Although a credit crunch will likely lead to a slow in the private equity pipeline, there's one deal on the horizon that cannot be stopped. Warren Buffett has said that Berkshire Hathaway (NYSE: BRK.A) is looking for a nice little $40 to $60 billion acquisition target. According to the New York Times DealBook, "In the latest effort to identify what the billionaire might add to his holdings, Bloomberg identifies four candidates that fit his well-known criteria: WellPoint, Nucor, Kohl's and Ikea."
Buffett's time may be at hand, given that there is now less competition as buyout shops tighten up. I have two ideas for possible targets. I doubt that either of these will come to fruition, but it makes sense based on Buffett's track record and investment objectives:
Moody's (NYSE: MCO) - The stock has been a poor performer of late, and the company is likely to continue to take heat for its role in the subprime fiasco. But it has a strong brand, and is reminiscent of his recent acquisition of Business Wire. If anyone can restore the firm's credibility, it's Buffett. Moody's is much smaller than the range Buffett mentioned, so he might need another deal to go along with it.
Home Depot (NYSE: HD) - This one has been getting called undervalued for a long time now, but nothing seems to shake the stock from its stupor.
Berkshire Hathaway already has positions in both of these companies. Would he consider trying to swallow one of them whole?
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Reader Comments (Page 1 of 1)
8-06-2007 @ 5:44PM
Michael Schneider said...
Both Warren Buffett and Billionaire Nelson Peltz are among those positioned to gain from the market turmoil. In a rare CNBC interview Peltz recently talked of how problems for private equity firms will help strategic buyers. A recent article about Warren Buffett indicated he is licking his chops as the market gets cheaper.
Both items are in the Billionaire Watch section at http://www.Barrelomoney.com.
8-06-2007 @ 5:44PM
Robert Nguyen said...
Home Depot would be an excellent buy for BKR given its fit into the portfolio, and its current price and evaluation. He may have to make offer higher than their current Dutch offering which is now between $39 and $44/ share.
8-06-2007 @ 6:10PM
Richard said...
Warren Buffet could do wonders with The Home Depot if he decided to purchase controlling interest in the company. His experience and his current holdings would position him to have a direct national outlet to all his acquired brands, Benjamin Moore, Shaw Carpet, USG, etc... This would set The Home Depot on a path to higher earnings and assist HD in rebuilding its tarnished reputation from the Robert Nardelli era. I am surprised that he would not look to Lowe's to invest due to the price of the company stock and the chance to really improve his earnings Robert Niblock, President of Lowe's, is watching the company backslide on sales and profit while he loses valuable customer service in the stores. It is possible that he could see Lowe's as a sinking ship with the ever increasing debt the company continues to trend. This debt is becoming a problem for the number two home improvement retailer and the growing pains of Lowe's trying to catch up to Home Depot. Many stockholders are beginning to question the management of Lowe's and the company will soon need to find new talent to turn the company around.