How Warren Buffett prepared to end his 60-year reign at Berkshire Hathaway

Warren Buffett has spent the past 60 years transforming Berkshire Hathaway from a failing textile mill into a $1 trillion company that’s more valuable than Tesla, Walmart, or JPMorgan.

The legendary investor took control of Berkshire in 1965 and steadily acquired scores of businesses, including Geico and See’s Candies, and built multibillion-dollar stakes in public companies, including Apple and Coca-Cola.

But at 94, the business titan knew the end of the Buffett era was near, so he carefully paved the way for his departure.

On Saturday, at an arena in Omaha full of Berkshire shareholders, Buffett announced he would resign as CEO by the end of 2025.

Buffett warned his shareholders that the clock was ticking on his tenure. He talked up Greg Abel and set the stage for his planned successor.

“I think the time has arrived where Greg should become the chief executive officer of the company at year end,” he said at the annual meeting in Omaha.

Buffett also sought to protect his legacy and ensure his vast fortune wouldn’t be squandered once he was gone.

“Succession planning is the most important thing in corporate governance for a company led by an iconic CEO,” Lawrence Cunningham, the director of the University of Delaware’s Weinberg Center on Corporate Governance and the author of several books about Buffett and Berkshire, told Business Insider.

Buffett’s conglomerate is “providing an exemplary and under-appreciated model for how this can be done well,” Cunningham continued, adding that it has “prepared the way not only for Greg to succeed Warren as CEO,” but also readied stockholders for their company to no longer have a controlling shareholder.

Passing the baton

“At 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters,” Buffett said in his February missive to Berkshire shareholders, making it explicit he’ll hand over the reins.

The billionaire bargain hunter has repeatedly reassured stockholders that Abel is a worthy successor. In his letter, he wrote that in those rare moments when opportunities abound, Abel has “vividly shown his ability to act at such times as did Charlie,” referring to his late business partner, Charlie Munger.

Buffett joked during last year’s annual meeting that shareholders “don’t have too long to wait” for a change in management. “I feel fine, but I know a little about actuarial tables,” he quipped.

The investor mentioned in his letter that he now uses a cane to walk, perhaps signaling he’s “considering the possibility of stepping down as CEO in the near future,” David Kass, a finance professor at the University of Maryland who’s been closely following Buffett’s company for four decades, told BI. He added that the nonagenarian might announce the decision as soon as Berkshire’s annual meeting in May.

Paving the way

Buffett appeared to be clearing the decks before the next captain takes over the ship, piling up Berkshire’s cash reserve to nearly $348 billion.

That cash mountain may reflect a “desire to hand a relatively clean slate to Greg” and enable him to “more easily perform the main function of a CEO, which is allocating capital,” Kass told BI.

During the annual shareholder meeting on Saturday, Buffett dismissed the speculation that he was preparing for his planned successor and said he “wouldn’t do anything nearly so noble as to withold investing myself just so Greg could look good.”

He added that he would be eager to invest more had the right opportunity at an attractive price come along.

In recent years, Buffett and his investment managers have sold several small but long-held investments, including General Motors and Procter & Gamble.

They’ve also cashed in $158 billion worth of stocks on a net basis in just the past two years, which has helped to boost Berkshire’s cash pile to record levels. Their efforts could leave plenty of dry powder for Abel to spend on stocks or finally bag the elephant-sized acquisition that has evaded Buffett for years.

Buffett and his deputies might be pulling back on purchases, ramping up sales, and halting buybacks because stock valuations have grown too expensive. But they might also see value in leaving a treasure chest for Abel to draw from and deploy as he wishes.

Protecting his legacy

Buffett disclosed last year that when he dies, his roughly 14% stake in Berkshire — worth more than $150 billion — will pass into a trust that counts his three children as trustees, and they’ll have to vote unanimously to spend any of it.

The plan not only protects the money from the taxman and earmarks it for worthy causes, it also aims to thwart activist investors who might otherwise seek to buy up Buffett’s shares once he’s gone and clamor for his conglomerate to be dismantled.

“I regard Berkshire Hathaway sort of like a painter regards a painting, the difference being the canvas is unlimited,” Buffett said in 2016, underlining his vision that the company will persist for generations.

In fact, Buffett’s efforts to prepare his shareholders for his exit, voice his confidence in Abel and set him up for success, and protect his personal stake in the business all speak to his devotion to ensuring Berkshire thrives long after he’s gone.

Buffett said at the annual meeting that he has “zero” intention “of selling one share of Berkshire Hathaway.”

“It’ll get given away gradually,” he said. “I would add this: The decision to keep every share is an economic decision because I think the prospects of Berkshire will be better under Greg’s management than mine.”

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