M&A

From Omaha to the Alps

Warren Buffett gives students at Swiss business school IMD a lesson in investment intuition.
Jason KaraianJuly 7, 2008

Having worked in business valuation for a Big Four accounting firm, Martin Schmidt is, naturally, an admirer of legendary investor Warren Buffett, CEO of Berkshire Hathaway. Now a first-year MBA student at Swiss business school IMD, Schmidt was delighted by a surprise visit from the American business icon to one of his lectures in May. “We get many visitors here, but obviously Warren Buffett is in a different league,” he says.

Buffett passed through Switzerland as part of a four-country tour of Europe aimed at identifying investment targets among the region’s family-owned businesses. Berkshire is “nowhere near as prominent in Europe as we should be,” Buffett told an audience in Germany, the first stop of his trip. He prefers family-owned businesses for their focus on the long term, with the condition that any target must generate at least $75m (€48m) in annual pre-tax profit and operate in an “understandable” sector, unlike software, he offered as an example.

At IMD, Buffett appeared alongside Eitan Wertheimer, chairman of Iscar, an Israeli metal-working company that became Berkshire’s first major purchase outside the US in 2006. The two helped introduce a new case study dissecting that deal by a trio of professors. Among the hundreds of offers Buffett receives every year, Wertheimer’s one-page letter — which gave Buffett the “basic facts and told me something about the person who ran [the company]” — was enough to convince him to buy a controlling stake in the company. “I usually know within five minutes if I’m going to make a deal,” he added.

The fact that the renowned investor “isn’t afraid to use his intuition” made an impression on Schmidt. In the lecture hall, students peppered Buffett with questions about how, given the short-term focus of financial markets and private equity firms, he motivates the managers in Berkshire’s portfolio of businesses to consider longer-term matters. “The answer was that he picks them very carefully,” Schmidt says. “He has a very good instinct for people.”

Aware of the risk of sounding arrogant, Schmidt explains how “One of the major goals for many people here, including myself, is to develop instincts and become better at the human side of business, rather than just focussing on technical matters.” There are few better equipped to teach these qualities than the “Oracle from Omaha.”

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