3 Reasons Buffett Should Buy Markelhttp://www.fool.com/investing/general/2013/04/09/heres-why-buffett-should-buy-markel.aspx Steve Symington
April 9, 2013
Shortly after Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) CEO Warren Buffett spent $12 billion in cash last month to acquire 50% of H.J. Heinz (NYSE: HNZ), he told the world he was ready for more.
Of course, there's certainly reason to believe the man given his past acquisition record; he spent $46.3 billion over the past seven years for Berkshire's stakes in Iscar, Marmon, Burlington Northern, and Lubrizol.
With that in mind, I noted recently that it might be a good idea for Buffett to shell out some dough to acquire a much smaller financial holding company like Markel (NYSE: MKL).
Today, I'd like to spend a little more time exploring that thought, so here are three big reasons Markel could be a great fit with Berkshire.
Leaders at the helm
With this in mind, if Berkshire were to purchase Markel with its autonomous leadership team, we could rest assured Buffett would have no problem letting them continue doing what they do best, especially considering what he wrote in his 2009 letter to Berkshire shareholders:
Additionally, Buffett later went on to shun the inefficiencies of "a stifling bureaucracy" -- another stance with which (as I noted back in February) Markel's Kirshner wholeheartedly agrees.
The best things in life are free
In addition, last December, Markel announced its largest acquisition to date in buying rival insurer Alterra (NASDAQ: ALTE), which greatly expands its insurance and reinsurance operations.
So how can this benefit the Oracle of Omaha aside from simply generating additional underwriting profits?
Like Berkshire with Buffett, Markel relies on Gayner's investing prowess to make the most of its shareholder equity. The big difference, however, is that Berkshire's massive balance sheet allows Buffett to also invest its insurance float, which gave him more than $73 billion in free money to work with in 2012.
While the added capital from the Alterra deal could very well give Markel the flexibility to eventually do the same on its own going forward, to be able to invest Markel's shareholder equity and insurance float wo