Finance History | Precision Castparts — The US$32.7 Billion Industrial Bet

Precision Castparts was headquartered at 4650 South Macadam Avenue in Portland when Berkshire Hathaway acquired all remaining shares on January 29, 2016, completing one of the largest purchases in Berkshire’s history from the home city of a highly specialized metals manufacturer. Berkshire’s 2016 annual report recorded cash consideration of US$235 per share and aggregate consideration of approximately US$32.7 billion including the value of PCC shares Berkshire already owned, financed with existing cash and a short-term credit facility. PCC made complex cast and forged components for aircraft engines, airframes, power-generation equipment, and other industrial uses, businesses where material science, qualification requirements, manufacturing yields, and long customer programs could create formidable barriers to entry. Those qualities supported the strategic case for the purchase, but they did not remove valuation risk because even an excellent industrial franchise can disappoint when the buyer capitalizes an estimate of normalized earnings that proves too optimistic. The transaction therefore joined two kinds of confidence: confidence in PCC’s competitive position and confidence that Berkshire’s purchase price left adequate room for cyclical weakness and operating surprises. That distinction became explicit in Berkshire’s 2020 shareholder letter, where Buffett said he had paid too much and had overestimated PCC’s average future profit, while Berkshire recorded an approximately US$11 billion write-down tied predominantly to the business. The impairment did not mean the factories or engineering capabilities disappeared, but it permanently separated the value of the operating company from the price Berkshire had assigned to it, making PCC an unusually clear lesson in how acquisition discipline can fail even when the underlying enterprise remains important. The cover uses Precision Castparts’ public-domain text-and-geometry mark from Wikimedia Commons because no suitably licensed transaction or headquarters photograph passed the image gate; it identifies the company rather than depicting the 2016 closing and remains subject to ordinary trademark protections.