Charlie Munger did not get to close a deal with his longtime companion Warren Buffett, yet he remained hopeful that Berkshire Hathaway-- which had almost $160 billion in cash-- would one day find its "elephant". "We have $160 billion, plus a great credit rating. And who in the world has that? Not many," he commented in a CNBC special, "Charlie Munger: Life of Wit and Wisdom" that aired on Thursday. He said that the size of the company means any purchase must be a large one to make a difference. "It can't be anything too small because it doesn't matter how good it is, we're of a size now where too small just doesn't move the needle very much. So we need something big to come along and use up all our cash, and some borrowing," he told CNBC's Becky Quick in an interview shortly before his death at 99 years old.
Berkshire, based in Omaha, held $157.2 billion in cash at the end of September. Buffett has been touting a potential elephant-sized deal for years, but his recent acquisitions have not met his expectations. Last year, the company bought insurer Alleghany Corp for $11.6 billion, and acquired Dominion Energy's natural gas pipeline and storage assets for almost $10 billion, bringing the company's total market value to $800 billion.
Munger, who was Berkshire's vice chairman, said that the transaction might have to be done by the succeeding generation of leaders. "I don't think it's hopeless. It may have to be done by some different people. You know that next time, we may not be able just to squeeze a little more lemon juice out of the old lemons. They may have to squeeze some new lemons, meaning new people have to make the decisions," he said. It could be Greg Abel, Ajit Jain, Ted Weschler, or Todd Combs, or somebody yet to be identified.
Berkshire's large war chest caused concerns when interest rates were near zero, but with the current short-term rate of 5%, the cash is now earning a considerable return. Munger often stood up for the company's decision to remain idle, seeing the advantages of waiting patiently for a great opportunity. He once said, "There are worse situations than drowning in cash, and sitting, sitting, sitting. I remember when I wasn't awash in cash-- and I don't want to go back."
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