Warren Buffett's Surprising Negotiation with Pete Liegl

In 2005, Warren Buffett, the renowned investor and chairman of Berkshire Hathaway, first encountered Pete Liegl, the founder of Forest River, during a meeting that would change the course of both their lives. Buffett was ready for a standard negotiation, but Liegl's salary request caught him completely off guard.

Nearly twenty years later, the deal has emerged as one of Berkshire Hathaway's most profitable acquisitions, demonstrating the power of unique leadership.

The Unexpected Salary Request

In his recent annual letter to shareholders, Buffett reflected on the impact that Liegl has had on the company, branding him as "one of a kind." He commended Liegl's leadership, highlighting that his efforts contributed "many billions" to the wealth of Berkshire's shareholders.

Buffett recounted how he was introduced to Forest River through a letter from an intermediary on June 21, 2005. Impressed by the company's fundamentals, he quickly arranged a meeting with Liegl, his wife Sharon, and his daughter Lisa, in Omaha.

The negotiating session was critical. When Buffett asked Liegl about his desired salary, Liegl replied in a way that left Buffett momentarily speechless: "Well, I looked at Berkshire's proxy statement and I wouldn't want to make more than my boss, so pay me $100,000 per year." This unexpected answer amazed Buffett, who agreed to the offer without hesitation. On top of that, Liegl requested a 10% bonus on earnings exceeding the company's previous performance, a condition Buffett also accepted.

Long-Term Success and Impact

Over the subsequent nineteen years, Pete Liegl’s management led to astonishing results, with no competitors even coming close to matching his performance. Under his leadership, Forest River has transformed into a multibillion-dollar enterprise within Berkshire Hathaway.

Despite facing various economic challenges, Forest River has consistently contributed to Berkshire's consumer products group. In 2024, the company reported a 6.4% growth in revenues, with unit sales increasing by 7.9%. This growth was partly fueled by recent acquisitions.

Even during a challenging year in 2023, Forest River demonstrated resilience. Its strong performance in 2022 contributed approximately $481 million to Berkshire's consumer products revenue.

In the fourth quarter, Berkshire Hathaway reported a significant rise in earnings, driven largely by robust insurance performance. The company's operating profit surged 71% to reach $14.53 billion, with insurance underwriting skyrocketing by 302% to $3.41 billion. Overall, full-year operating earnings increased by 27%, totaling $47.44 billion.

Buffett's letter to shareholders acknowledged that not every business acquisition yields success. However, he emphasized that champions like Liegl, who built an empire on talent rather than elite educational backgrounds, highlight how a single exceptional decision can lead to enormous success over time.

Buffett, Liegl, Forest, Berkshire, Acquisition