The business of acquiring businesses
Berkshire Hathaway’s subsidiaries are engaged in industrial (VIS), building product, and apparel businesses. They manufacture industrial and end-user products. Examples of subsidiaries in this space include the following:
- Lubrizol—a specialty chemical manufacturer
- IMC International Metalworking Companies—an industry leader in metal cutting tools businesses with worldwide operations
- Forest River—a leading manufacturer of leisure vehicles
- CTB—a manufacturer of equipment and systems for the livestock and agricultural industries
Berkshire Hathaway’s main strategy is to acquire businesses to expand or add value to them. In 2015, Warren Buffet added Precision Castparts (PCP) to Berkshire Hathaway’s manufacturing portfolio for about $32 billion. In 3Q15, the company’s manufacturing business reported revenues of $9.1 billion, compared with $9.5 billion during the same quarter last year. The division reported earnings before taxes of $1.3 billion, compared with $1.3 billion during the previous year’s corresponding quarter. The business generates more profitability on average than the overall company. In 4Q15, Berkshire’s manufacturing is expected to post growth due to consumer spending, the holiday season, and improved pay scales.
McLane and volume business
McLane is a high-volume and low-margin business. In 2012, it acquired Meadowbrook Meat Company, a large food service distributor for national restaurant chains. Berkshire Hathaway (BRK-B) acquired McLane from Walmart (WMT) for $1.5 billion in 2003.
Berkshire Hathaway reported revenues of $12.3 billion and profits of $106 million for McLane in the third quarter, compared with 12.2 billion and $120 million, respectively, in the prior year’s corresponding quarter. Revenues expanded due to the food service and beverage operations.
McLane operates a wholesale distribution business that provides grocery and non-food products to retailers, convenience stores, and restaurants. The company also operates as a wholesale distributor of distilled spirits, wine, and beer. Its clients include Walmart, 7-Eleven, and Yum! Brands (YUM). Continue to the next part for a look at Berkshire Hathaway’s involvement in services and retail.