Warren Buffett's dealmaker closed the biggest 'blank-check' takeover ever this month. Here's why he may owe the Berkshire Hathaway chief for the deal.
Warren Buffett's dealmaker struck an $11 billion deal to acquire MultiPlan this month, marking the biggest "blank-check" takeover to date. Former Citi banker Michael Klein got to know MultiPlan and its boss when he advised Buffett's Berkshire Hathaway on a potential purchase of the healthcare group in 2013, the Financial Times reported on Tuesday. Klein's history with Buffett includes persuading him to invest in Dow Chemical in 2009, and helping to convince him not to pursue a takeover of Unilever by Kraft Heinz in 2017. The Wall Street rainmaker's advisory team includes ex-Apple design chief Jony Ive, and Berkshire holds a $96 billion stake in Apple. Visit Business Insider's homepage for more stories.
Warren Buffett's dealmaker recently struck the biggest "blank-check" takeover in history. He reportedly owes the Berkshire Hathaway chief for putting the target on his radar. Michael Klein, a former Citi banker, closed the $11 billion acquisition of US healthcare group MultiPlan by his Churchill Capital III investment vehicle earlier this month. Churchill Capital III is one of Klein's four SPACs, or special-purpose acquisition vehicles, which are designed to take companies public by acquiring or merging with them. Read More: BANK OF AMERICA: Buy these 9 stocks poised to crush the market in any market environment as they spend heavily on innovation Klein advised Berkshire when it looked at acquiring MultiPlan in 2013, the Financial Times reported on Tuesday. The deal didn't happen, but Klein became familiar with both the company and CEO Matt Tabak during that period, the newspaper said. Klein has worked with Buffett on several deals over the years. He persuaded the famed investor to buy $3 billion worth of Dow Chemical's preferred stock as part of the chemicals giant's $15 billion takeover of rival Rohm & Haas in 2009, according to Institutional Investor. He also helped to convince Buffett to scrap Kraft Heinz's proposed $143 billion takeover of Unilever in 2017. The banker called the Berkshire chief to highlight political concerns around the deal and connect him with Unilever's boss, then Kraft Heinz pulled its offer hours later, CNBC reported. Other connections to Buffett Churchill Capital III is buying MultiPlan from Hellman & Friedman, which itself acquired the healthcare group from a division of CV Starr & Co, an insurance-and-investing conglomerate run by former AIG CEO Hank Greenberg that people have compared to Berkshire. Read More: Leka Devatha quit a cushy corporate career to start flipping houses. She breaks down how she made $1 million on a single deal by supercharging a simple strategy. Klein's firm, Klein & Co, houses a group of experts called Archimedes Advisors. They include former Ford CEO Alan Mulally, ex-CBS chairman Joe Ianniello, and former Apple design chief Jony Ive, the Financial Times said. Berkshire is one of Apple's biggest investors with a $96 billion stake. Buffett has described the tech giant as Berkshire's "third business" after insurance and railroads. Klein's record for the largest US-based SPAC IPO is under threat from billionaire Bill Ackman, who hopes to raise $4 billion for his SPAC, Pershing Square Tontine Holdings, when it goes public this week. Ackman is a longtime admirer of Buffett and counted Berkshire as one of his biggest holdings until recently.Join the conversation about this story » NOW WATCH: What makes 'Parasite' so shocking is the twist that happens in a 10-minute sequence
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Chewy cofounder Ryan Cohen lays out the crucial skills he learned from Warren Buffett and his father, and explains why he's all-in on Apple
Summary List Placement Ryan Cohen ignored the naysayers when he cofounded an online pet-supplies retailer in...Summary List Placement Ryan Cohen ignored the naysayers when he cofounded an online pet-supplies retailer in 2011 and squared off against Amazon and Pets.com. He ultimately sold the company for $3.4 billion in 2017, and stepped down as CEO the following year to spend more time with his family and pursue personal goals. Cohen broke with convention again by investing the vast majority of his wealth in two stocks, Apple and Wells Fargo, and later placing a contrarian bet on ailing video-game retailer GameStop. The entrepreneur attributes his independent streak to the "two biggest influences on my professional life": his father, Ted Cohen, who passed away last December, and Warren Buffett, the billionaire investor and Berkshire Hathaway CEO. "Something critical that I learned from my dad and Warren Buffett was the ability to separate myself from the herd and think independently," Cohen told Business Insider this week. The pair's teachings allow him to "block out the noise, develop my own point of view, and not be influenced by daily headlines or the consensus or what's in style." For example, many people initially doubted Chewy would be able to ship 30-pound bags of pet food to customers and make any money. "In the early years, few investors thought Chewy was a good idea," Cohen said. "I struck out raising capital over 100 times." Ignoring the skeptics, as well as avoiding distractions and saying "no" to all but the best opportunities, enabled Cohen to focus on the things most critical to Chewy's success: competitive prices, compelling products, fast shipping, and personalized customer service. The former Chewy chief credited his dad, who ran a glassware-importing business, with giving him the courage of his convictions. Cohen's father taught him to trust his instincts, treated him like an adult from an early age, solicited and listened to his opinions, and demonstrated what it meant to deeply understand a business. "I learned how to build my company by watching him build his," Cohen said. Going all in After selling Chewy, Cohen plowed the bulk of his windfall into Apple and Wells Fargo, flouting traditional investment advice about the need for a diversified portfolio. Cohen felt comfortable with his decision partly because he bought his first Apple share at age 15, making it one of the first stocks he ever owned. The technology titan's ecosystem of hardware, software, and services — which makes it a headache for users to switch to rival products — was a key attraction, he said. Apple's offerings have become even more integral to people's lives during the pandemic, Cohen argued. People increasingly rely on their iPhones, iPads, MacBooks, and apps to keep in touch with friends and family, work from home, conduct daily tasks such as shopping and banking, and entertain themselves. "The strongest business in the world," Cohen proclaimed, echoing Buffett's comment in February that Apple is "probably the best business I know." Cohen also brushed off concerns about Apple's valuation, arguing that it's relatively cheap when rock-bottom interest rates mean bonds are yielding close to zero. Cohen declined to comment on his Wells Fargo and GameStop investments. Betting like Buffett Cohen's emphasis on focus, independent thought, and investing with conviction aren't the only strategies he shares with Buffett. The Chewy cofounder cited 'disciplined capital allocation," or spending money strategically and responsibly, as a key driver of his company's success. Buffett specializes in taking the cash flowing into Berkshire from its scores of subsidiaries, and redeploying it where it's needed most. Cohen focused on selling pet food at Chewy, because he recognized that customers would slash every expense they could before cutting back on feeding their pets, resulting in a "sticky" customer base. Consumables offered slimmer profit margins than toys or accessories, but the lifetime value of their buyers relative to the cost of acquiring them meant they generated higher returns in the long haul, he added. Buffett famously favors companies that sell essential or staple products and services to a dedicated customer base. For example, Berkshire counts American Express, Visa, Mastercard, Coca-Cola, Procter & Gamble, and Kraft Heinz among the roughly 45 stocks in its portfolio. Cohen and Buffett also have investments in common. Apple is by far the most valuable holding in Berkshire's portfolio, and the conglomerate owned $3.3 billion worth of Wells Fargo stock at the last count. Finally, Cohen practices Buffett's advice to "be greedy when others are fearful." "Value doesn't move but stock prices do, creating an opportunity if you have the right temperament to buy stuff on sale," he said.Join the conversation about this story » NOW WATCH: Why it's okay to eat the brown part of an avocado
Welcome to 10 things before the opening bell. Sign up here to get this email in...Welcome to 10 things before the opening bell. Sign up here to get this email in your inbox every morning. Here's what you need to know before markets open. 1. The EU agreed a historic, unprecedented 750 billion euro ($860 billion) recovery fund as the bloc fights the fallout of coronavirus. The package comprises around 390 billion euros in grants, and a further 360 billion euros in low-interest loans. 2. European stocks surge as EU leaders agree the 'shiny' recovery pact. The pan-continental Euro Stoxx 50 climbed 1.5%, while Germany's DAX was up 1.7%. US stocks are also set for a positive open, gaining between 0.7% and 0.9%. 3. UBS saw profits slide 23% in the second quarter as it warns of credit losses ahead due to COVID-19. The giant Swiss lender was the first major European bank to release second quarter results, and they showed the impact the pandemic is having on the sector. 4. Warren Buffett's dealmaker closed the biggest 'blank-check' takeover ever this month. Former Citi banker Michael Klein reportedly owes the Berkshire Hathaway chief for putting the target on his radar. 5. Morgan Stanley warns tech stocks are unusually vulnerable to earnings disasters over the next few weeks. The firm shares its strategy for profiting regardless of the outcomes. 6. Goldman Sachs says these 17 trades can help investors maximize their gains from the stocks most affected by the US elections in November. 7. $8.6 billion trading app Robinhood is canceling its UK launch amid an explosion in day traders. Robinhood has postponed its UK launch indefinitely to focus its efforts on the US, where it has seen millions of new users this year. 8. Uber has been quietly helping governments with contact tracing for months. Uber has been quietly helping health officials around the world with contact tracing, the company told Reuters. 9. Earnings coming in. Philip Morris Q2 2020 and Novartis Q2 2020 earnings are due. 10. On the economic front. US API Weekly Crude Oil Stocks and Canadian Retail Sales are due. Join the conversation about this story » NOW WATCH: We tested a machine that brews beer at the push of a button
Wall Street's biggest influencer says Warren Buffett might look 'out of touch' but that's a key element of his success
Warren Buffett did little during the market meltdown because he wasn't sure how the coronavirus pandemic...Warren Buffett did little during the market meltdown because he wasn't sure how the coronavirus pandemic would develop, Wall Street influencer Shane Parrish told Business Insider. "When you don't understand with a certain degree of certainty, you sit out until you do," the Farnam Street blogger and host of "The Knowledge Project" said. Buffett was expected to buy stocks, strike bailout deals, and make a big acquisition when markets tanked, but instead he added to Berkshire's huge cash pile and sold his airline holdings. "You have to be willing to look like an idiot in the short term to get the best long-term results," Parrish said. Visit Business Insider's homepage for more stories. Warren Buffett took cover during the coronavirus crash because he didn't know how the pandemic would play out, Wall Street's biggest influencer suggested in an interview with Business Insider this week. "I'd suggest that because the future has become increasingly uncertain, he's preparing for the widest range of possible futures," Farnam Street blogger and "The Knowledge Project" host Shane Parrish said. "When you don't understand with a certain degree of certainty, you sit out until you do," he added. Parrish, who interviews billionaire investors such as Ray Dalio and Bill Ackman on his podcast, cautioned that he couldn't speak for Buffett. However, his obsession with the famed investor and Berkshire Hathaway CEO lends some credibility to his speculations. The former Canadian intelligence official often draws on Buffett's biography, philosophy, and personal habits. For example, his past blog posts advise readers to focus their efforts, constantly read and learn, and stay within their circle of competence. Parrish has also attended Berkshire's annual meetings for more than a decade, and named his blog after the company's street address in Omaha. Looking like an idiot Buffett has been accused of losing a step since he failed to deploy Berkshire's massive cash pile when markets tanked earlier this year. The 89-year-old investor was widely expected to bolster his stock portfolio, strike the types of bailout deals he made during the financial crisis, and bag the "elephant-sized acquisition" he has promised for years. Instead, Buffett added about $9 billion to Berkshire's cash hoard in the first quarter, cashed out his stake in Goldman Sachs, and sold his positions in the "big four" US airlines in April at a loss. "People always seem to want the optimal solution for the moment, and thus he ends up looking out of touch at times," Parrish said about the backlash. "But you have to be willing to do something different to get different results," he continued. "And that means you have to be willing to look like an idiot in the short term to get the best long-term results." Buffett is already showing signs of renewed vigor. Berkshire recently closed a $10 billion deal to acquire Dominion Energy's natural-gas assets, and appears to have repurchased more than $5 billion worth of its stock in recent weeks. However, Buffett's primary focus will undoubtedly be protecting his shareholders' money and keeping ample cash on hand that he can use both offensively and defensively. "You can't win if you don't finish," Parrish said. "Perhaps more importantly for him, you can't compound if you zero out." "In periods of high uncertainty, you want to ensure you have the most possible options."Join the conversation about this story » NOW WATCH: How waste is dealt with on the world's largest cruise ship