Greg Abel’s first major acquisition as Berkshire Hathaway CEO looks a lot like the kind of deal Warren Buffett would have made himself.
Berkshire’s $6.8 billion purchase of homebuilder Taylor Morrison Home gives the conglomerate a larger foothold in housing, expands an existing business line and appears to have been struck at a bargain valuation
Just as notable was how little involvement Buffett had in the process. “Greg did that faster than I could have done it, smoother than I could have done it, and I never talked to the CEO,” Buffett said. “He has launched.” Berkshire agreed to pay $72.50 a share in cash for Taylor Morrison, valuing the homebuilder at roughly $6.8 billion in equity value and $8.5 billion including debt. Analysts at Citizens said the valuation appears modest compared with recent deals in the industry. “Based on recent completed transaction multiples, the 0.9x price-to-tangible book value multiple we estimate Berkshire is paying appears low relative to recent public builder transactions,” Citizens analysts wrote. They noted that the acquisition of Tri Pointe Homes earlier this year implied a multiple of roughly 1.2 times forward tangible book value, while MDC Holdings was purchased at about 1.3 times tangible book value last year.
Berkshire ecosystem The transaction also fits another hallmark of Berkshire’s acquisition strategy: buying businesses that become more valuable inside the conglomerate than they would be on their own. Housing has long been one of Berkshire’s core businesses. The conglomerate owns Clayton Homes, the nation’s largest producer of manufactured and modular housing, along with a wide range of businesses tied to residential construction, including flooring, insulation, roofing, paint and brick manufacturers.