Greg Abel completes first acquisition as Berkshire CEO: $8.5B Taylor Morrison deal

Warren Buffett's successor, Greg Abel, has completed his first acquisition as Berkshire Hathaway's CEO—a clear signal that he is ready and willing to build on the foundation Buffett established.

The Taylor Morrison Acquisition

In a Friday press release, Berkshire announced it has officially taken over Taylor Morrison for $8.5 billion in cash, a deal first disclosed at the end of May.

Taylor Morrison is one of the nation's largest land developers and homebuilders. According to its latest annual report, the company generated approximately $1 billion in pre-tax profits on roughly $8 billion in revenue last year.

The homebuilder now joins Berkshire's portfolio of housing-related subsidiaries, which includes:

• Berkshire Hathaway HomeServices (real estate brokerage network)
• Clayton Homes
• MiTek
• Acme Brick

Abel's Vision for Homebuilding

"Berkshire is acquiring a best-in-class national homebuilder, led by an exceptional team and backed by a trusted reputation for customer experience," Abel said in the May press release, echoing Buffett's appreciation for market power, quality management, and strong brands.

Abel stated he expects to "unify our site-built homebuilding operations into a combined platform enabling us to deliver the dream of homeownership to more Americans."

He shared an almost identical vision in Friday's press release, signaling his intent to marshal Berkshire's homebuilding resources to help address the affordability crisis that has prevented many Americans from becoming homeowners.

The press release outlined that Taylor Morrison's brands—including Esplanade, Yardly, and Taylor Morrison Home Funding—will be combined with Berkshire's site-built homebuilding operations, a group of 15 regional and local homebuilders that make up Clayton Properties Group.

Taylor Morrison's CEO, Sheryl Palmer, similarly described the united operations as having "transformative" scale and reach.

Forging His Own Path

Abel took over from Buffett on New Year's Day, ending the legendary investor's nearly six-decade run that transformed a failing New England textile mill into a $1 trillion conglomerate. Buffett remains chairman, and both men have said he provides input on every major decision.

Regarding the Taylor Morrison deal, Buffett told CNBC's Becky Quick in May: "Greg did that faster than I could have done it, smoother than I could have done it, and I never talked to the CEO. He has launched."

Capital Allocation Challenges and Moves

Buffett's defining struggle in recent years has been finding smart ways to deploy Berkshire's cash pile, which doubled to $380 billion in the two years ended March 31. That sum exceeds the market capitalization of many of America's most valuable companies, including General Electric, Coca-Cola, and Procter & Gamble.

The bargain hunter has:

• Balked at buying stocks at historic highs
• Hesitated to make acquisitions when private-market valuations are lofty and private equity firms present fierce competition
• Even bought back Berkshire stock as it climbed to record highs

The situation may finally be improving. Buffett recently told CNBC that he made the decision to invest in Alphabet last year. During the nine months ended March 31, Berkshire amassed a stake in Google's parent company worth $18.5 billion today.

It bought another $10 billion of stock in a private placement in June, giving it a roughly $28 billion stake today, assuming it hasn't altered the size of its holding in recent months.

That means Berkshire—which rarely makes big changes to its stock portfolio—took Alphabet from scratch to a top-five holding in under a year.

Berkshire also struck a deal to acquire OxyChem in October for nearly $10 billion from Occidental Petroleum, one of the larger holdings in its stock portfolio in recent years.

Building His Team

Alongside his efforts to allocate Berkshire's capital, Abel has also started putting his top lieutenants to work. According to an SEC filing, Michael O'Sullivan (Berkshire's first general counsel) and Charles Chang (poised to take over as finance chief from Marc Hamburg next year) briefly served as interim directors of the acquisition vehicle buying Taylor Morrison, alongside Hamburg.

It is not entirely clear how much influence Buffett has had on Abel's early decisions. But between making an AI giant one of Berkshire's largest holdings, acquiring a leading homebuilder, and enlisting O'Sullivan and Chang into the merger process, Abel is clearly starting to make his mark.