Under Warren Buffett's leadership, Berkshire Hathway (BRK.A) has grown into a $270 billion company that owns ten of billions of dollars in common stock in companies like Wells Fargo (WFC), IBM (IBM), The Washington Post (WPO), and Coca-Cola (KO). In addition, the Buffett empire fully owns 80 businesses ranging from insurance to furniture to candy and ice cream.
At this year's annual shareholder meeting in Omaha, Nebraska, Buffett said at least eight of the companies he owns are so successful, that they would be on the Fortune 500 list if they were stand alone entities.
So how does a business change once it gets backed by Buffett?
Long before the billionaire got involved, Dairy Queen had been busy dishing up dillies and other delectable treats for more than 60 years at its thousands of iconic stores scattered around the country.
While the Berkshire Hathaway (BRK.A) billionaire’s sweet tooth is the stuff of legend, so is his business acumen and eye for a deal. When he got the chance in 1998 to acquire this household name, he scooped it up on the cheap.
"Over the last five years, we've had some tremendous growth," says Dairy Queen International President & CEO John Gainor from the floor of the Century Link center in Omaha, Nebraska. "Right now we have 6,300 stores, we're in 22 countries. Our international business continues to grow. We have 1,100 units in international markets, and our biggest international market is China where we have 550 stores."
And Dairy Queen isn’t alone. In fact, business after business in the Buffett empire will tell you that the prestige, autonomy and financial clout that comes from being a part of Berkshire Hathaway is a huge competitive advantage. But this doesn't mean the company gets gutted or restructured.
"I think Warren's point is that he buys companies and he likes to have the people stay with those firms; he had a reason to buy them," says James Issler, President & CEO of H.H. Brown --the Berkshire-owned shoe maker. "He pretty much lets them run the same way they were. It's a pleasure, most importantly, to work for gentlemen like Warren Buffett and Charlie Munger."
One of Berkshire's more recent acquisitions was the $500 million deal to buy Oriental Trading Co. last November. The novelty/party supply retailer emerged from bankruptcy in February 2012 and has had a string of private equity owners over the last several years.
"The biggest change for us now that we're part of Berkshire is that we have a permanent home," says Oriental Trading Co. CEO Sam Taylor. "The other big change is no debt. When you're owned by private equity there's leverage involved, a lot of debt. And all of the sudden we have a clean balance sheet with no debt."
Furthermore, this CEO was excited for his employees.
"One thing Warren said to me was, 'if you want I'll come meet with your employees and tell them I bought Oriental Trading and I'm going to own it forever," says Taylor. "For our employees, that was huge. To have a permanent home at Berkshire Hathaway, it doesn't get any better than that."
While some characterize the purchase of this small, Omaha-based business as inconsequential or a good neighbor acquisition, the press release announcing the deal suggests otherwise. It states, “Oriental Trading is a leader in its industry, has a strong management team and delivers exceptional customer value and service.”
These are hallmark attributes cited in almost every Berkshire deal. Whether large or small, new or old, people who study this company say the DNA and culture is unique.
"Integrity is key; in everything Warren does the most important thing is integrity," states Taylor. "It doesn't matter if you lose money in the short term, that's okay. But what's never acceptable is to lose one ounce of credibility and reputation for Berkshire Hathaway; that comes first."
Even businesses where Berkshire holds only a minority stake, the Buffett effect can be seen and felt. Take Coca-Cola, where the Oracle of Omaha controls less than 9% of the company's stock; he recently turned up at their annual meeting to share his insights with Coke’s CEO on the value of studying failure.
One indisputable fact remains, all of these businesses speak a similar language of integrity and extreme loyalty to the former paperboy from Nebraska.
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