In his recent annual letter to Berkshire Hathaway Inc. shareholders, Buffett pointed to Berkshire's 1972 acquisition of See's Candy Shops Inc. as a shining example of an ideal acquisition. However, in the very same letter, Buffett called the 1993 purchase of Dexter Shoes for $433 million "the worst deal I've made." He went so far as to call Dexter "a worthless business," notes Corporate Dealmaker. Why are these two deals glaringly different? Simple, Dexter failed to live up to Buffett's four basic rules to dealmaking:
- "A business we understand"
- "Favorable long-term economics"
- "Able and trustworthy management"
- "A sensible price tag"
While Dexter likely met some of those requirements -- after all, Berkshire already owned shoemaker H.H. Brown when it bought Dexter -- based on Buffett's comments it probably failed to receive a check on the second point: "favorable long-term economics."
For more about Berkshire's Dexter purchase, see Corporate Dealmaker. - Matthew Wurtzel
While Dealscape recently examined Warren Buffett's M&A "turn ons," affiliate Corporate Dealmaker examined one of the Oracle of Omaha's biggest disappointments.
