On February 14, 2013, the news broke that Berkshire Hathaway, the conglomerate run by Warren Buffett, was planning to purchase H.J. Heinz—and its iconic Heinz ketchup—for $23 billion. Joining Berkshire Hathaway in the acquisition was 3G Capital Management, a Brazilian-backed investment firm that owns a majority stake in Burger King. As such, the deal marked a harmonious pairing between burgers and ketchup.
Heinz is a profitable company whose stock has risen nearly 17% over the past year. Although Buffett claims to have been eyeing Heinz since 1980, the deal appears to have been initiated by 3G. Jorge Paulo Lemann, one of 3G’s main backers, approached Buffett about teaming up to purchase Heinz about two months before the deal was announced. After Buffett got on board, the two companies discussed the possibility of buying Heinz with the company’s CEO, William R. Johnson.
The deal was received as a sign that the dormant world of mergers and acquisitions (M&As) was picking up steam worldwide. Advice for others considering acquisitions and other significant purchases? Avoid irrational exuberance, perform thorough due diligence, and estimate the value of potential purchases with extreme caution.