Private equity firms with retailers in their portfolios may be missing a trick. While many GPs are no doubt dedicating considerable operational resource to steering these companies through a tough economic climate, they may find that the endorsement of just one individual may be all that's needed to transform their fortunes. And that individual is investment guru Warren Buffett.
Buffett was most recently in the news for his Berkshire Hathaway investment arm's $34 billion acquisition of railroad giant Burlington Northern Santa Fe Corp, which he described as an “all-in wager on the economic future of the United States”.
What was a little less publicised was a vote of confidence in the future of a Chinese suit maker, Shanghai-listed Dalian Dayang Trands. Buffett declared that he loved the company's suits so much he had thrown out all his others, and mentioned that Microsoft chairman Bill Gates was now also a convert after being introduced to the suits by Buffett. The impact of this was extraordinary: a 229 percent increase in Trands' share price was attributed to Buffett's remarks.
The so-called Sage of Omaha has also directly contributed to Trands' sales, according to reports. Although his own outfits are given to him for free, a number of Buffett supporters are reported to have placed orders for the suits after another glowing endorsement from Buffett at Berkshire Hathaway's most recent annual meeting.
All of which begs the question: should private equity firms not be dispatching free samples from their portfolio companies to Buffett's Omaha HQ in the hope of obtaining a prized stamp of approval?