Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) finished the third quarter of 2023 with $157.2 billion in cash and short-term investments (mostly Treasury securities). Buffett is known for keeping large stockpiles of cash on the sidelines, but this is the most the conglomerate has ever had. Even excluding the $30 billion Buffett insists on keeping at all times, there's $127.2 billion in ammo for the company to go shopping.

Realistically, Berkshire's budget is even higher. The company has top-notch credit and massive borrowing capacity, so if the right opportunity came along, there's no reason Berkshire couldn't make a purchase for, say, $150 billion.

Plus, it's likely we'll find that Berkshire's cash hoard has increased, once again, in the fourth quarter. We recently learned Berkshire sold a significant amount of its HP stock, and there's no indicators that Buffett and his team are doing a ton of buying in the stock market.

What could Berkshire buy?

Just looking at the company's actual cash on hand minus the $30 billion cushion, there are only about 80 companies Berkshire couldn't theoretically afford to buy with the cash it has on hand. Just to put things into perspective, Lowe's, AT&T, Starbucks, and Lockheed Martin all have market caps lower than Berkshire's available cash.

When an acquisition is made, the acquirer typically pays a premium over the market value. However, the point is that Berkshire has the capacity to make a big acquisition -- if it wants to.

Plus, with many experts still expecting a recession in 2024, there's a solid possibility that business valuations could come down. Buffett has said that he wants to be a provider of liquidity to the system during tough times. It was this exact mentality that allowed Berkshire to invest in Bank of America and Goldman Sachs at fire-sale valuations around the time of the financial crisis.

Why Berkshire might want to sit on its capital

Although Berkshire's cash stockpile is at an all-time high, there's an argument to be made that Buffett could be less eager to make a big acquisition than he was a few years ago. In short, with the rising interest-rate environment, Berkshire is getting paid very well for its idle cash right now. Just as one example, the three-month U.S. Treasury yield was about 0.06% at the beginning of 2022. It's about 5.42% as of this writing.

While Berkshire doesn't have all of its money in any one specific maturity of Treasuries, this implies that the company could earn about $8.5 billion per year from its cash. Just a couple of years ago, Berkshire's cash was earning virtually nothing.

In other words, in order to appeal to Buffett, any potential acquisition target would likely need to have a strong possibility of generating more cash flow than could reasonably be achieved from simply keeping its cash as is.

Will we finally see a big acquisition in 2024?

Of course, nobody has a crystal ball, and there's a lot that can happen in one year regarding market conditions, interest rates, and other factors. As long as interest rates stay elevated, we might see some smaller acquisitions, but the chances of a massive deal taking place appear to be rather low, given Berkshire's risk-free rate of return from its cash.