Warren Buffett takes his own advice in walking away from Unilever bid

Legendary investor has cited baseball on takeover discipline

Warren Buffett is so good at dealmaking that bankers and salesmen study his musings endlessly for clues on how he does it. But even he doesn’t always get his way. And he has advice on that, too.

On Sunday, Kraft Heinz  withdrew its Buffett-backed bid for Unilever, which would’ve created the world’s No. 2 food-and-beverage company. It adds to a list of proposed transactions involving Buffett or his partners that weren’t completed, like reported attempts to buy Yahoo!’s core assets or take over Avon Products Inc., the cosmetics maker.

The decision to back off so quickly after Unilever said it’s not interested might seem illogical. Buffett’s Berkshire Hathaway has roughly $80 billion in cash that’s barely earning anything. And the proposed deal would’ve invested some of that in partnership with the private-equity firm 3G Capital, which has already made him a lot of money.

But it illustrates one of Buffett’s favorite investing principles: There’s no need to chase deals. Buying companies, he has observed, is like hitting a baseball. Don’t swing at one that’s out of your comfort zone.

“The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot,” Buffett said in the HBO documentary “Becoming Warren Buffett.” “And if people are yelling, ‘Swing, you bum!’ ignore them.”

Unilever, which makes Lipton teas, Knorr soup and Axe deodorant, met many of the criteria for acquisitions that Buffett lays out in Berkshire’s annual reports. It’s a large, simple business, with consistent earnings. But Buffett doesn’t do hostile takeovers. He says it’s not that he’s against them, they’re just not his specialty.

“Certain hostile offers are justified,” Buffett wrote in his 2015 annual letter. “We, though, will leave these ‘opportunities’ for others.”