Buffett discussed the “managerial kiss” in corporate acquisitions. Often times, managers are too confident in their skills in improving the economic value after acquisitions, thus inflating the premiums companies pay for acquisitions.
What kind of companies are good in inflationary environment?
- ability to increase prices without fear of losing market share of volume
- can scale up without large incremental capex
The bond yield in 1981 sounds “horrible” – “long-term taxable bond yields exceeded16% and long-term tax-exempts 14%”. Buffett discussed the difficulties for businesses to outperform such passive return.