Warren Buffett loses takeover battle for Tech Data

Warren Buffett’s Berkshire Hathaway loses a takeover battle for global distributions company Tech Data to private-equity firm Apollo Global Management

Dec. 2, 2019

We talk a lot about the Oracle from Omaha on this blog. We talk about his greatest investments and we talk about the stocks he was wrong about, but it is rare we talk about the acquisitions that never happened. This is one of those times. 

Tech Data Corp (NASDAQ: TECD) announced last week that it had been purchased by Apollo Global Management (NYSE: APO). The private equity firm had made an initial bid of $130 a share before Buffett’s Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) attempted to intercept the deal, offering $140 a share. The bid was countered by Apollo, upping its offer to $145 a share and giving the business a $6 billion valuation including debt. That was too rich for Buffett’s blood who bowed out of the attempted acquisition. 

Tech Data is a global distribution company that delivers IT hardware and software. It specializes in delivering products from big tech companies such as Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) to smaller businesses. The Florida based company had $37 billion in revenue last year and would have been the perfect gift for Berkshire investors this holiday season. However, Apollo’s steamrolling acquisition strategy was not to be halted. According to Apollo founder Leon Black, the firm is looking to almost double its assets to $600 billion over the next five years, with Tech Data being the most recent in a slew of multi-billion dollar acquisitions this year. 

What does this mean for Berkshire Hathaway?

The Berkshire CEO and chairman has been lamenting the exorbitant price of businesses in recent years and this takeover battle is case and point. Buffett’s investing style has always been to spot an undervalued business and push all-in. It’s a strategy that has made him one of the greatest investors of all time. However, in one of the longest bull markets in history, where the S&P keeps hitting new record highs, Buffett’s hunt for a bargain is proving fruitless. This has resulted in Berkshire Hathaway’s stock price being on course to record its worst year of underperformance since 2009. 

While it’s not been the best year in the books for the most expensive stock in the world, it’s certainly not all doom and gloom down in Omaha, Nebraska. With a lack of acquisitions comes an influx in cash. $128 billion dollars to be exact. Or if like me, you equate money to its equivalent weight in African Elephants, it’s approximately 180 bulls worth of $100 bills (there’s a bull market joke here somewhere). We’ve come up with a few ideas for this cash pile on our Stockclub Podcast this week, as well as a list of 3 stocks he would love. Somehow my idea for an elephant reservation in Nebraska did not make the final cut. 

Buffett himself has famously said that cash is the world’s worst investment so Berkshire Hathaway investors can rest easy knowing that the world’s greatest value investor is still trying to find the right home for the company’s cash reserves.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Berkshire Hathaway, Amazon and Microsoft. Read our full disclosure policy here.