Buffett shares his view on investment choices

The US$4-billion (Bt135.9 billion) purchase by Berkshire Hathaway of 80 per cent of Iscar Metalworking, an Israeli company that manufactures metal-working tools for automobile, die-and-mould and aerospace industries, stunned the markets. It was Berkshire's first acquisition of a company with headquarters outside the United States. The world wanted to know what was so compelling about this Israeli company that led Berkshire's chief executive Warren Buffett, to move out of his comfort zone and make such an unconventional investment.

The recently-published IMD case study, "The Oracle of Omaha Meets the Visionaries of Galilee", tracks the story of Iscar's founding 56 years ago, its development into one of the powerhouses of its industry under the management of second-generation leader, Eitan Wertheimer, and how and why the deal was done with Berkshire. As part of the case launch and in celebration of 20 years of family-business research and education at IMD, Buffett and Wertheimer stopped by the Lausanne campus on May 20 and Buffett described his approach to investing.

The important thing is to buy into the right business with the right people and at the right price.

Further, Buffett counselled individual investors not to expect rewards too quickly. Hard work and consistency of approach are critical, not only in stock purchases but also in managing companies. Buffett and family-business owners share a belief in these values, along with a commitment to a long-term investment horizon, a robust corporate culture and a leadership team with a passion for its business.

There are times, however, when every family business will face a fork in the road. Either through succession vacuum, family disunity or financial constraints, many family enterprises will need to examine their options for securing their company's future and the family's wealth.