Appendix C 

Berkshire Hathaway’s Acquisition Criteria 

We are eager to hear from principals or their representatives about businesses 
that meet all of the following criteria: 

1. Large purchases (at least $50 million of before-tax earnings). 

2. Demonstrated consistent earning power (future projections are of no interest 
  to us, nor are “turnaround” situations). 

3. Businesses earning good returns on equity while employing little or no debt. 

4. Management in place (we can’t supply it). 

5. Simple businesses (if there’s lots of technology, we won’t understand it), 

6. An offering price (we don’t want to waste our time or that of the seller by talk- 
  ing, even preliminarily, about a transaction when price is unknown). 

The larger the company, the greater will be our interest: We would like to make 
an acquisition in the $5–20 billion range. We are not interested, however, in 
receiving suggestions about purchases we might make in the general stock market. 

We will not engage in unfriendly takeovers. We can promise complete confiden- 
tiality and a very fast answer — customarily within five minutes — as to 
whether we’re interested. We prefer to buy for cash, but will consider issuing 
stock when we receive as much in intrinsic business value as we give. 

Charlie and I frequently get approached about acquisitions that don’t come close 
to meeting our tests: We’ve found that if you advertise an interest in buying col- 
lies, a lot of people will call hoping to sell you their cocker spaniels. A line from 
a country song expresses our feeling about new ventures, turnarounds, or auc- 
tion-like sales: “When the phone don’t ring, you’ll know it’s me.” 

  Source: www.berkshirehathaway.com