Charlie Munger, the lifelong partner of Warren Buffett, expressed hope that Berkshire Hathaway, with nearly $160 billion in cash, will find a major acquisition at the end of his life. The 99-year-old Munger told CNBC that an elephant-sized deal was necessary to use up the cash and borrowing capacity of the company. Berkshire Hathaway currently holds a record of $157.2 billion in cash at the end of September. However, recent smaller acquisitions have not met the company’s expectations.
The conglomerate, now nearing a market value of $800 billion, recently bought Alleghany Corp. for $11.6 billion and Dominion Energy’s natural gas pipeline and storage assets for almost $10 billion. Munger, who passed away this week, believed that the next generation of leaders at Berkshire Hathaway might have to make the mammoth deal. This potential acquisition could be made by people like Greg Abel, vice chairman of Berkshire’s non-insurance operations, or Ajit Jain, the vice chairman of insurance operations. It could also be Buffett’s two investing lieutenants, Ted Weschler and Todd Combs, or someone not yet identified.
The large cash reserves at Berkshire Hathaway had been a cause for concern in the past, but with short-term interest rates now topping 5%, the cash pile is earning a substantial return. Munger always defended Berkshire’s inaction by letting cash grow and patiently waiting for a good opportunity. “There are worse situations than drowning in cash, and sitting, sitting, sitting. I remember when I wasn’t awash in cash — and I don’t want to go back,” Munger once said.
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