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Author: Robert Mundheim


Deals without Bankers: Salomon and Benjamin Moore

Warren Buffett has a reputation for not relying heavily on investment bankers in doing transactions.

A. Salomon, Inc.  The first time I personally experienced this aspect of Buffet’s approach occurred in connection with the sale of Salomon, Inc. to Travelers. Salomon was a major investment bank which had a near death experience in 1991. Berkshire was a very substantial shareholder of Salomon and Buffett played a significant role in its rebuilding.

Although Delaware decisions in the wake of Smith v. van Gorkum suggested the advisability of the board of directors of a company being sold getting a fairness opinion from an outside investment banker, Salomon did not get such a fairness opinion to validate the price its shareholders received in the sale of the company. It did put Salomon Brothers investment bankers to work getting the same type of information and analysis which would normally be given to a board of directors in connection with a business combination for which Salomon Brothers had been retained to give a fairness opinion.

Salomon considered the advisability of securing a fairness opinion, but as the proxy states “ . . . a fairness opinion would have provided little, if any, incremental value to the deliberations of the Salomon Board given the insurance and securities industry expertise of the officers and directors of Salomon and its subsidiaries who were evaluating the Merger from a financial point of view.”

B. Benjamin MooreMy next experience with Warren Buffett and his willingness to do transactions without involving an outside investment banker occurred when I was an outside director of Benjamin Moore. Benjamin Moore was essentially a family- controlled corporation which had acquired enough other shareholders to be traded in the over-the-counter market. The company decided that it was time either to go public or be sold. It retained an investment banker to advise it. After studying the company, the investment banker determined that the company should be able to command a price of $X. It then tried to find buyers at that price, but proved unable to do so. Read More