I won't keep you in suspense. Here's the answer: "Cross Warren Buffett with a motorcycle," and you get another multi-million dollar acquisition for Brrrrrr-kshire Hathaway!

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Berkshire Hathaway CEO Warren Buffett invests in motorcycles -- but he rides the fluctuating stock market. Photo: Flickr.

On Friday, Mr. Buffett's megaconglomerate -- actual spelling Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) -- announced that it has signed a deal to buy German motorcycle apparel and accessories retailer Detlev Louis Motorrad-Vertriebs GmbH for $452 million.

The name won't rumble familiar to most American ears, but Detlev Louis -- which markets itself as simply "Louis" in Europe -- operates a chain of more than 70 outlets throughout Germany and Austria, and sells online in 25 countries. According to its website, Louis specializes in retailing motorcycle clothing, helmets, and accessories, but sells "30,000" products online.

While this deal looks small by Berkshire standards -- for context, Berkshire is in the process of buying Duracell from Procter & Gamble for $4.7 billion, and Berkshire's done even bigger deals than that -- Louis is not a small business by any means.

Size is a matter of perspective
When discussing the acquisition Friday, Buffett did admit that the Louis purchase "is smaller than something would normally do, but it is a door opener. I like the fact that we have cracked the code in Germany." As he revealed in an interview on Fox Business earlier this month, if this deal works out, he'd "love to buy big" companies in Europe, too.

There's every likelihood that Buffett's Louis buy will work out for Berkshire. After all, Buffett and Berkshire are no strangers to the retail business. Among Berkshire's dozens of subsidiaries, you'll find such household names as See's Candies, Fruit of the Loom, Heinz, and Nebraska Furniture Mart -- and even The Pampered Chef.

None of these companies are in the business of selling motorcycle paraphernalia, but Berkshire does have significant expertise in businesses otherwise tied to the automotive industry. Probably its best-known subsidiary, GEICO, recently passed Allstate (NYSE:ALL) to become America's second-largest auto insurer. Berkshire bought car dealership Van Tuyl Group last year. And in 2009, the company got a good look at the inner workings of motorcycling monarch Harley-Davidson (NYSE:HOG) when it helped save that company from the financial crisis with a $300 million loan.

The valuation
Speaking of Harley, it's worth noting that the price Buffett is paying suggests he's getting a substantial discount on Louis. According to press reports, Louis generates roughly $310 million in annual sales. At his $452 million purchase price, Buffett is only paying about 1.5 times sales for his new subsidiary. That's not only less than the 1.9x sales valuation on Berkshire Hathaway's own shares; it's also significantly less than the valuations on analogous shares of Harley-Davidson, which sells for 2.1 times sales according to data from S&P Capital IQ), or Polaris (NYSE:PII), which costs nearly 2.3 times sales.

Granted, both these businesses are primarily engaged in selling motor vehicles, which Louis does not do; but Harley and Polaris derive significant percentages of their annual revenues (for Polaris, it's 17%) from sales of the kinds of parts, garments, and other accessories tied to their brands in which Louis does specialize.

To that extent, at least, the businesses appear analogous. And given the size of the disparity in valuations -- Polaris and Harley selling for price-to-sales ratios as much as 50% higher than Berkshire Hathaway is paying for Louis -- it sure does look like Buffett could be riding away with a great deal.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 291 out of more than 75,000 rated members.

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