Warren Buffett’s alleged heir emerges from the shadows – fr

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Warren Buffett’s alleged heir emerges from the shadows – fr


More than a decade before Berkshire Hathaway investors finally got an answer to their most pressing question – which would succeed Warren Buffett – company insiders were already cultivating Greg Abel.

David Sokol, then managing director of the vast Berkshire energy company, told Buffett in 2007 that he wanted to give Abel his own job, arguing that it was time for his “right-wing lieutenant” to take the lead.

Abel had worked side-by-side with Sokol, negotiating some of his more complex deals, including a purchase of natural gas lines in the wake of the Enron collapse over the weekend. Buffett at first hesitated, but was finally convinced.

“There’s a reason why in 2008 I handed the CEO title to Greg,” Sokol said. “I had been doing this 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 acquiring a much larger utility; other executives found only a rounding error. This business – HomeServices – is now one of Berkshire’s gems and one of the largest residential real estate brokers in the United States.

Sokol also recalled how quickly Abel decided to cut costs and improve the efficiency of newly acquired Northern Electric in the UK in the 1990s. Abel crossed the Atlantic to help manage the ‘business.

“After two meetings, we sat down and Greg had a sheet of paper with all these layers crossed out,” he said.

Sokol himself was once considered Buffett’s natural heir, but he resigned from the company in 2011 after a scandal involving share purchases from Lubrizol, a company later acquired by Berkshire. U.S. securities regulators investigated the transactions but did not press charges.

A second existential question

The anointing of Abel last week by Buffett, 90, answered a question that has long hung over Berkshire Hathaway. But that didn’t end another, arguably more pressing, debate: Does Berkshire have a reason to exist without Buffett and his longtime consiglier Charlie Munger, 97, at the top?

Molded in the image of Buffett, the company is unlike almost any other American company. It has an extensive collection of businesses that encompass insurers such as Geico, the Burlington Northern Railway, furniture stores, auto dealers, and electric utilities. But just as important are the public investments – stakes in companies like Apple and Bank of America – that make Berkshire closer to a mutual fund than a regular business.

Abel, a 58-year-old Canadian, may be an exceptional trader, but it is not known if he is also a savvy investor, some investors have quietly said.

So far, investors have had only fleeting moments to get to know the man. Abel has been primarily media shy – he declined to comment for this article – and his appearances to the investment community have been brief.

In 2020, in the midst of a pandemic, he joined Buffett on an empty stage to answer questions from shareholders. But his responses were limited, mostly on the companies he oversaw, and he let his boss give the wise advice that for many investors is the main focus of a Berkshire rally. It wasn’t until this month that shareholders got a little more substance.

The initial reaction was warm, as Abel impressed analysts with his knowledge of the energy sector and gave a strong case for how the company would reduce its carbon footprint. People who worked with him described him as “highly motivated,” “disciplined,” and possessing a “unique ability” to sift through vast amounts of information, traits they also see in Buffett.

Ron Olson, a director on the Berkshire board of directors, added that he was “a clear-spoken person” who had absorbed the corporate culture directly from Buffett and Munger over the past decade.

“He won’t be Warren in his personality, but he has the same kind of credibility and integrity that Warren has,” Olson said, adding that Abel had “one hell of a work ethic.”

“He grew up on the ice, plays hockey and has several false teeth to show. This kind of competitiveness passes. “

Energy to go up

Abel found his way to 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 company’s energy clients, a small company known as CalEnergy.

“Everything I asked him to do, he did 125%, then looked at things around him to do better too,” said Sokol, who ran CalEnergy. “Greg needed very little mentoring. What he needed was just to be given opportunities.

CalEnergy under Sokol and Abel went into a bargaining frenzy before Berkshire bought the company in 2000. Before turning 40, Abel had been elevated to president and chief operating officer of the energy unit. , subsequently becoming the owner of a valuable 1% interest in it.

It was there that he earned much of his trading chops. The division was behind some of Berkshire’s biggest takeovers, a fact that has not been forgotten by shareholders who complain about the gigantic pile of $ 145.4 billion cash that the conglomerate has amassed.

Abel was deeply involved in the $ 5.1 billion purchase of PacifiCorp by Berkshire in 2005, its $ 10.4 billion acquisition of Nevada Utility NV Energy in 2013 as well as one of the most recent transactions of the company: the $ 8 billion buyout of Dominion Energy’s pipeline business last year.

“A lot of mergers and acquisitions are done with Greg. . . can be very charming when he goes out, ”said someone who worked on chords with Abel.

Thomas Russo, the managing member of longtime Berkshire investor Gardner Russo & Quinn, said it was this ability to deploy “immense amounts of capital” that made Abel the natural choice to succeed. Buffett.

It remains to be seen whether Abel will be more successful than Buffett in breaching the war chest. Berkshire’s playbook, which has long avoided bidding wars, has reduced the company’s trading at a time when other companies and investors are also strapped for capital.

And Abel has yet to show he’s ready to break the mold. The company’s $ 18 billion bid for Oncor Energy in 2017 failed, a deal Abel practically struck before it was crushed by another bidder, said “Greg has embraced that style.” said the person who worked on agreements with him.

It’s unclear how Abel would work with the rest of the Buffett-groomed team if he took over, including Todd Combs and Ted Weschler, who help manage the company’s investment portfolio, and Ajit Jain, the vice president of Berkshire who runs its valuable insurance operations. Jain described the couple’s relationship as respectful, albeit unlike what Buffett and Munger have cultivated over the years.

Investor control will only increase as the liquidity stack grows and pressure mounts on Berkshire’s carbon footprint and barriers to competition. The company’s utilities division, where Abel played a key role, came under special scrutiny. Its energy business in Nevada spent a lot in 2018 to reject a proposal that would have deregulated the state’s electrical activity.

“They are protecting their monopoly by any means possible,” said Nora Mead Brownell, who was previously commissioner of the Federal Energy Regulatory Commission. “I think Warren represents a certain set of values ​​that are executed by the Greg Abels of the world,” she added.

Although Abel was chosen by the board of directors, the company is not yet handing over the keys. After all, the board has been preparing for the succession for over a decade.

“Warren still has a lot of life. I want to stress this, ”Olson said. “Greg is our man right now. If it’s 10 years from now, who the hell knows.

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