Case One Analysis: Warren E. Buffet
The following is a case analysis of the business endeavors of Warren E. Buffett affiliated with Berkshire Hathaway and the acquisition of GEICO. Berkshire Hathaway is a renowned private company that focuses on the attainment of property and casualty insurance businesses on both a direct and reinsurance basis (Warren E. Buffet 1995). They and their subsidiaries operate in multiple business areas which have spurred analysis from experts on the manner in which they conduct their affairs.
With the acquisition of GEICO, many key issues have manifested themselves to a point of keen debate. Some argue that the philosophy of the business strategy implemented during the acquisition is controversial and even questionable. Others; however, examine the successful maneuvers of Mr. Buffett in order to emulate his performances. Therefore, the purpose of this paper is to find out whether the acquisition of GEICO is in close harmony with Berkshire Hathaway's long-term goals, to determine whether the price of GEICO acquisition is fair, and finally, to identify the underlying cause for the abrupt increase in the price of Berkshire Hathaway shares.
Shortly after the announcement, the acquisition of GEICO increased the value of Berkshire Hathaway's shares generating $718 million in equity. It can be concluded that the increase in equity meant that GEICO shares is worth more that the current price of its stock prior to the acquisition. After extensive research, Berkshire concluded that GEICO stock was worth more than the current price and therefore, decided to purchase the company.