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What is Buffett Looking for in Europe?

There can't be many Americans who look at euro-dollar rates at $1.50 and think "time to go shopping in Europe." But then Warren Buffett, the CEO of Berkshire Hathaway, is estimated by Forbes to be the richest man in the world, and he reportedly has $35 billion to spend.

His cash pile will not go as far as it would have done a year ago, but he is the kind of investor who doesn't let near-term market and economic developments get in the way of his bigger picture.

Warren Buffett
AP
Warren Buffett

His PR offensive is designed to put Berkshire Hathaway on the radar screen for mid-sized family-run businesses in Europe that might at some stage want to sell up. The Oracle of Omaha is looking for European businesses with pre-tax profits of at least $75 million, but he says the bigger the better. The tour began in Frankfurt, continues in Lausanne, Switzerland Tuesday and rolls on to Madrid and Milan later in the week.

Buffett is keeping tight lipped about the types of businesses that he wants to buy and he says that no immediate deals are expected. His portfolio in the US is diverse but fairly traditional. He operates in insurance, clothing, furniture, gas and confectionary businesses to name a few. And he is keen to stress that he only invests in businesses that he understands.

In that vein, the German leg of his tour resulted in some mixed press coverage. The paper Handelsblatt says he seems very "old school" in his investment approach but the weekly Der Spiegel says he may be the savior of the German family business.

Warren Buffett has been critical in the past of the US administration's handling of the dollar and has suggested that he wants to diversify his currency base. So in that sense, we shouldn't be surprised if he wants to add some domestic or pan-European businesses to his portfolio. But many are wondering why now, and why Europe?

Despite resilient growth figures in the euro zone, they pale in comparison with Asian rates. Buffett rather obtusely says he wants to fish in the pond where the fish are, and Europe is a much better pond. He has had some success in Asia in the past (he got in and out of PetroChina with a tidy profit) and he has talked of opportunities there this week.

The IMD business school on the banks of Lake Geneva, where he has gathered Swiss family businesses and journalists today, seems a logical setting for his PR offensive. The school has run a program looking at the merits and challenges for family businesses for the past 20 years. Just which of them will succumb to Buffett's charm we might not find out this week. But at 77 Warren Buffett and his 84-year-old Vice Chairman Charlie Munger, are still planning for the long term.

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