Buffett’s taste for beans gives deal outlook a shot in the arm

 
Elizabeth Fournier
IF confirmation were needed that mega-deals are back on the agenda, then the Sage of Omaha certainly provided it yesterday.

Buffett’s $28bn move for Heinz is the biggest deal this year in an already booming market, with the value of transactions in the last week alone – including Liberty Global’s bid for Virgin Media and the US Airways/AMR tie-up – nearing a huge $90bn.

For weary bankers, lawyers and other advisers who’ve been living off scraps for the past five years, the sudden flurry of activity smells like something of a renaissance. For the rest of us, it certainly feels like the start of something exciting.

Dig a little deeper though, and it’s clear that things have changed since the mad days of 2005-7. Buffett’s choice of advisers (and financiers) is proof that elephant-sized deals no longer need elephant-sized traditional investment banks. Wells Fargo – in which Berkshire holds a close-to 20 per cent stake – stumped up cash for the deal as well as leading Buffett’s transactional advice, in something of a coup for a bank better known for mortgage lending than billion-dollar M&A deals. It’s life, bankers, but not as you knew it.

As for Buffett, it’s no secret that he’s been sniffing around for a worthy target for his £48bn cash-pile for some time, and choosing Valentine’s Day to shoot an arrow though the heart of one of the world’s best-loved brands is certainly fitting. On the surface, Buffett and beans looks like a match made in heaven. Heinz’s solid management history, strong brand position and stock outperformance – well ahead of both its sector and the broader S&P500 – fit his long-held investment model of sticking to what he knows.

The veteran investor has historically shied away from investing in en vogue technology firms he claims to know little about, favouring instead brands that fit in with his view of the world. With the blockbuster Heinz deal, Buffett has finally exercised the “itchy trigger finger” he’s been referring to for years, and his comments yesterday that he’s already on the hunt for another elephant will only stoke excitement that a genuine pipeline of deals is starting to return. Deal-starved advisers will be hoping his appetite for beans on toast is a taste of things to come.

Elizabeth Fournier is News Editor of City A.M. @ej_fournier

ADVISERS BUFFETT’S BID FOR HEINZ

BLAIR EFFRON
CENTERVIEW PARTNERS

TO broker the marriage between one of the world’s most famous investors and its best-loved brands, both sides turned to long-time affiliates for financial advice, favouring smaller firms over Wall Street’s traditional big hitters.

Heinz chose Blair Effron’s Centerview Partners, founded in 2006 by the ex-UBS investment bank vice chairman.

Effron has a long history of advising on big ticket consumer deals, including InBev’s $52bn acquisition of Anheuser-Busch and the merger of Unilever and Hellman’s owner Bestfoods in 2000.

Heinz also instructed Bank of America Merrill Lynch and turned to Davis Polk & Wardwell for legal advice.

Berkshire Hathaway and 3G Capital, meanwhile, were advised by Lazard on their

consortium bid, with help from JP Morgan and Wells Fargo.

Lazard has previously worked for 3G’s Jorge Paulo Lemann on his $4bn acquisition of Burger King in 2010.

Munger, Tolles & Olson was legal adviser to Berkshire Hathaway, while Kirkland & Ellis worked for 3G.

Moelis & Company – which has been climbing up the M&A rankings in recent months having been better known in the past for restructuring work – was financial adviser to the transaction committee of Heinz’s board and law firm Wachtell Lipton Rosen & Katz served as its legal adviser.

Steven Lipin, the former Wall Street Journal finance editor and US senior partner at Brunswick Group since 2001, headed up Heinz’s external PR advice.