Berkshire Hathaway’s new CEO, Greg Abel, has wasted no time in making his mark, initiating a week of significant financial maneuvers that signal a potential shift in the conglomerate’s long-standing operational philosophy.
Abel kicked off the week with a $6.8 billion acquisition of homebuilder Taylor Morrison, swiftly followed by a $10 billion stock investment in Google's parent company.
Beyond these substantial deals, Abel has hinted at a departure from Warren Buffett’s renowned hands-off operating model. He plans to consolidate Taylor Morrison with Berkshire’s existing site-built homebuilding operations, which are part of its Clayton Homes subsidiary.
For six decades under Buffett’s leadership, Berkshire largely allowed acquired companies to operate autonomously, with executives retaining control over day-to-day operations.
"Over time, we expect to unify our site-built homebuilding operations into a combined platform," Abel stated regarding his first major acquisition on Sunday, "enabling us to deliver the dream of homeownership to more Americans."
In addition to Clayton, which specializes in manufactured homes but also has a site-built unit, Berkshire owns several other housing-related businesses, including Benjamin Moore paint and Shaw Floors, suggesting further potential for integration.
The new investment in Alphabet expands on a stake Buffett’s company began building last fall. By the end of March, Berkshire’s Alphabet investment had tripled to nearly 58 million shares, valued at almost $17 billion.
Alphabet announced Monday that Berkshire has agreed to purchase $5 billion of Class A common stock and another $5 billion of Class C stock. This investment is part of Alphabet’s broader plan to raise $80 billion to fund the computing infrastructure necessary for its artificial intelligence offerings.
While the extent of Abel’s consolidation plans across Berkshire’s dozens of diverse holdings remains unclear – which include insurers like Geico, manufacturers such as Precision Castparts, and retail giants like Dairy Queen – he is widely regarded as a more active manager than Buffett.
CFRA Research analyst Cathy Seifert noted, "Given Greg’s strength as an operator it will be interesting to see if he does consolidate these units to get some greater scale and efficiencies."
Abel has overseen all of Berkshire’s non-insurance businesses since 2018, encouraging subsidiaries to cooperate more where beneficial, though he only became CEO in January. Buffett remains chairman and Berkshire’s largest shareholder.
Investor Steven Check, president of Check Capital Management, commented, "Under Greg, where it makes sense for efficiencies or scale, we’ll likely see more consolidation than we saw under Buffett when Berkshire was smaller and the acquired company’s founders were still in place."
Berkshire shareholders are likely to welcome Abel’s deal-making, especially given the Omaha-based company’s substantial cash reserves, currently nearing \$400 billion. While this particular deal may not significantly impact Berkshire’s vast bottom line, deal-making and investing were key areas where investors had questions about Abel’s leadership.
Buffett himself praised Abel in a CNBC interview on Monday morning. "Greg did that faster than I could have done it, smoother than I could have done it, and I never talked to the CEO. He has launched," Buffett told CNBC.
Although Abel has led acquisitions before within Berkshire’s utility division, those decisions were ultimately signed off by Buffett. Now, Abel is making these choices with advice from Buffett and the board.
Berkshire agreed to pay Taylor Morrison investors $72.50 per share in the all-cash deal. That represents a 24% premium over the company's previous closing price of $58.50. Shares of the Scottsdale, Arizona-based homebuilder jumped up near that purchase price on Monday while Berkshire's shares slipped 1%.
But Raymond James analyst Buck Horne said in a research note that it's possible Berkshire could face competition from private equity firms or other potential buyers willing to pay more for Taylor Morrison before its shareholders vote on whether to accept this offer.
"We would not be shocked if other players and/or private equity began to sharpen their pencils before the ink on this agreement is fully dry," Horne said.
