[ad_1]
More than a decade before Berkshire Hathaway investors finally received an answer to their most pressing question: who would succeed Warren Buffett, the company’s professionals were already cultivating Greg Abel.
David Sokol, then chief executive of Berkshire’s energy business, told Buffett in 2007 that he wanted to give Abel his own job, arguing that it was time for his “right-handed lieutenant” to take the lead.
Abel had worked side by side with Sokol, negotiating some of his most complex agreements, including the purchase of natural gas lines after the collapse of Enron over the course of a weekend. Buffett at first refused, but was finally convinced.
“There’s a reason why in 2008 I ceded the title of CEO to Greg,” Sokol said. “I’ve been doing it for a long time and frankly I thought Greg was better than me.”
Abel had seen the potential of a small real estate business that came with the acquisition of a much larger utility company; other executives had only seen a rounding error. This business, HomeServices, is now one of Berkshire’s gems and one of the largest residential real estate brokers in the US.
Sokol also recalled the speed with which Abel moved to reduce costs and improve the efficiency of newly acquired Northern Electric in the United Kingdom in the 1990s. Abel moved across the Atlantic to help run the company.
“After two meetings, we sat down and Greg had a sheet of paper with all those layers scratched,” he said.
Sokol himself was seen as Buffett’s natural heir, but resigned from the company in 2011 following a scandal over the purchase of shares in Lubrizol, a company Berkshire later acquired. U.S. securities regulators investigated the transactions but did not charge.
A second existential question
Last week Abel’s anointing Buffett, 90, answered a long-hung question about Berkshire Hathaway. But has it not launched another debate, no doubt more urgent: does Berkshire have a reason to exist without Buffett and his longtime adviser Charlie Munger, 97, at the top?
Represented in Buffett’s image, the company does not look much like any other in the American corporation. It owns a wide collection of companies that include insurers like Geico, the Burlington Northern railroad, furniture stores, car dealerships and electrical services. But equally important are public investments (stakes in companies like Apple and Bank of America) that make Berkshire more like an investment fund than a regular business.
Abel, a 58-year-old Canadian, may be an exceptional trader, but it’s unclear if he’s also a shrewd investor, some investors have quietly said.
So far, investors have only had fleeting moments to meet the man. Abel has been mostly shy with the media (he declined to comment on this article) and his appearances before the investment community have been brief.
In 2020, in the midst of a pandemic, he joined Buffett on an empty stage to answer shareholder questions. But his responses were limited, mainly on the business he supervised, and left his head to give wise advice which, for many investors, is the chief purpose of a Berkshire meeting. It was only this month that shareholders were granted a little more substance.
The initial reaction has been warm, as Abel impressed analysts with his knowledge of the energy business and gave a strong idea of how the company would reduce its carbon footprint. People who have worked with him described him as “highly driven,” “disciplined,” and that he possessed a “unique ability” to examine large amounts of information, traits he also sees in Buffett.
Ron Olson, director of the Berkshire council, added that he was “a simple-speaking person” who had absorbed the company culture directly from Buffett and Munger over the past decade.
“It won’t be Warren in his personality, but he has the same kind of credibility and integrity that has come to Warren,” Olson said, adding that Abel had “a hellish work ethic.”
“He grew up on the ice, playing hockey, and has several false teeth to prove it. This type of competitiveness is achieved ”.
The energy will increase
Abel found his way into the business through one of his many acquisitions. After working as an accountant at PwC in San Francisco, in 1992 he went to work for one of the firm’s energy clients, a small company known as CalEnergy.
“Anything you asked him to do, he did it with 125% and then he looked at things around him to make it even better,” said Sokol, who ran CalEnergy. “Greg needed very little tutoring. What he demanded was that he be given the opportunities ”.
CalEnergy with Sokol and Abel went into business before Berkshire bought the company in 2000. Before he turned 40, Abel had been promoted to president and chief operating officer of the energy unit, becoming a valuable 1% stake.
It was there that he gained much of his ribs. The division has accounted for some of Berkshire’s most important acquisitions, a fact they have not let go of shareholders complaining about the gigantic $ 145.4 billion cash pile the conglomerate has accumulated.
Abel has been deeply involved in Berkshire Purchase of $ 5.1 billion of PacifiCorp in 2005, its Acquisition of $ 10.4 billion of Nevada NV Energy ‘s utility in 2013, as well as one of the company’ s most recent offerings: the Purchase of $ 8 billion of Dominion Energy’s pipe business last year.
“A lot of the mergers and acquisitions are going out with Greg. . . it can be very charming when it comes out, ”said someone who has worked on deals with Abel.
Thomas Russo, a longtime managing member of the investor at Berkshire, Gardner Russo & Quinn, said this ability to deploy “immense amounts of capital” has made Abel the natural choice to succeed Buffett.
It remains to be seen whether Abel will be more successful than Buffett in putting himself once in the war chest. Berkshire’s playbook, which has long avoided bidding wars, has reduced the company’s business negotiation at a time when other companies and investors are also on the brink of capital.
And Abel has yet to show that he is willing to break the mold. 2017 of the company a failed $ 18 billion offer for Oncor Energy, a deal that Abel had practically sewn up before another bidder shattered it, he stressed as “Greg has adhered to that style,” said the person who worked with him.
It’s unclear how Abel would work with the rest of Buffett’s prepared team if he does, including Todd Combs and Ted Weschler, who help manage the company’s investment portfolio, and Ajit Jain, Berkshire’s vice president who runs it. Its valuable insurance operations. Jain described the couple’s relationship as respectful, albeit unlike what Buffett and Munger have cultivated over the years.
Investor research is likely to only increase as the cash stack grows and the pressure on Berkshire’s carbon footprint and barriers to competition. The utility division of the company, where Abel played a key role, has a particular elaborate examination. Its Nevada energy business spent strongly in 2018 to defeat a proposal that would have deregulated the business of state power.
“They protect their monopoly by any means possible,” said Nora Mead Brownell, who was previously a commissioner for the Federal Energy Regulatory Commission. “I think Warren represents a certain set of values that are executed by Greg Abels of the world,” he added.
Although Abel has been chosen by the board of directors, the company has yet to hand over the keys. After all, the board has been preparing for the succession for more than a decade.
“Warren has a lot of life left. I want to emphasize it, “Olson said.” Greg is our man right now. If ten years from now, who the hell knows. “
[ad_2]
Source link
