Finance Would the GEICO Acquisition Case Study

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This in fact gives Buffet the upper hand to know that his investment will turn around and bring substantial monetary gain to him and his business over the longevity of the business holding.

What might account for the share price increase for Berkshire Hathaway at the announcement? In actuality, Buffet used a simple component that was recognizable through most of his other business purchasing transactions. In all transactions, there would be an increase in the offer per share. Another cause of the increase could be that often interest in a company would significantly increase when Berkshire Hathaway would become involved. Due to being, a well-known substantiated person/company that is significantly known for increasing the value of a company, not necessarily in the short-term but yet using concepts dealing with longevity. In fact, it is evident that when buffet is considering such an accusation that he has increased the dollar per share amount within the12 to 20% range throughout his professional life. Berkshire Hathaway would often pay over market value in a business transaction for several reasons.

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First, this would give the current shareholders incentive to smoothly transition into a transition of Berkshire Hathaway having over 59% take in that given company. Second, Buffet is known for analyzing projected revenues in a company. As if to show that he would invest such a large amount in price because he knew that he would see the money double, even triple within the first year or two.

All the information in the reading shows that this was not a discussion that was made without thought and consideration. Agency theory applies in a not so perfect manner with this particular case. In this case, it does not appear that Buffet is acting on a personal profit manner. In fact, it is reported throughout the reading that when he does make a discussion he makes it with the shareholders in mind, not what he personally….....

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