Private Equity: Bidding for the Same CompaniesNarrow moat

When a family decides to sell a profitable private business, Berkshire is one of several possible buyers, and it is rarely the highest bidder. Private equity funds compete for the same companies with leverage Berkshire will not use, mandates that require them to deploy capital, and returns measured over a holding period rather than forever.

That structure lets a financial buyer pay more for the same cash flows. It can lever the acquisition, strip costs, and sell in five years — so the price it can justify exceeds what a permanent owner paying cash can. Berkshire's counter is not price; it is everything the Seller of Choice page describes, and it works with exactly the kind of owner who cares what happens to their employees and their name after the cheque clears.

The honest problem is that this advantage only decides the deals where the seller's preferences matter more than the price. In auctions run by bankers for financial owners, Berkshire simply loses, and a great deal of the private market is now that kind of auction. Berkshire's root threat on size describes the consequence: the pool of businesses large enough to matter and available on Berkshire's terms is small and getting smaller — against more than 60 companies bought on those terms historically¹.

Watch acquisitions completed per year and the multiples paid. A Berkshire buying steadily at sensible prices is the machine working; a Berkshire that either stops buying or starts paying auction prices has lost this contest in one direction or the other.