Warren Buffett Investment in Fechheimer – why Warren Buffett invested in Fechheimer, a seemingly ‘boring’ company that makes uniforms. Fechheimer specializes in making uniforms for the police, fire, postal service, train and EMS departments. Brands it is known by include Flying Cross and Fechheimer.
Buffett acquired 84% of Fechheimer for $55 million in 1986. The company was sold to a group of venture capitalists in a leveraged buyout in 1981. The leveraged buyout meant that the company assumed significant debt to finance the buyout, causing it to start with high debt-to-equity. However, with the solid operations of the company, Fechheimer was able to pay down its debt substantially in five years.
Fechheimer’s Competitive Advantage
This investment was attractive to Buffett for several reasons:
First, it had a long and successful operating history. Fechheimer began operations in 1842 and has consistently produced strong profits even when burdened with significant debt.
Second, it is owned by family members who want to continue to run the business as owners and managers. In fact, several generations of the family are active in the business – it is a great source of family pride. This is seen as a strong positive by Buffett, as he wants managers who are personally vested in the business’s success.
Third, there was a good match in the motivations of the buyer and seller. The sellers, the managing family, wanted a buyer who would not re-sell the business regardless of price, and who would allow the business to be run in the future as it had been in the past. Buffett saw no reason to tweak an evergreen business’s formula for success, and thus was happy to oblige.
The Warren Buffett Fechheimer investment added another quality company to Berkshire Hathaway’s portfolio.