Buffett’s Connections to Bear Stearns Runs Through Kravis

Shares of Bear Stearns jumped on Wednesday amid speculation that the firm is in talks to sell a minority stake to billionaire investor Warren Buffett (see article from The Wall Street Journal). Other firms that have expressed interest include Bank of America, Wachovia, JPMorgan, and China Construction Bank. IntellectSpace created a Knowledge Map to see if Warren Buffett has any ties to Bear Stearns that could play a role in this possible deal.

After reviewing the Knowledge Map we found that if Buffett is interested in acquiring a stake in Bear Stearns the initial contact might involve Henry Kravis, the billionaire investor and Co-Founder of Kohlberg Kravis Roberts & Co. Buffett and Kravis were both longtime Directors at Gillette Co during overlapping periods and likely are well acquainted. Kravis was previously a Partner at Bear Stearns in the Corporate Finance Department and later left the company to help form KKR.

Given that both men are major players on Wall Street, Buffett might seek advice and information on Bear Stearns through Kravis.

Click here for an interactive version of this IntellectSpace Knowledge Map (Internet Explorer browsers only): http://nv.intellectspace.com/ispace/GuestMonitor.aspx?id=35c7e85d-9dc6-4fb1-9b4c-ca3e17cf2d92

Comments

[KH]

While I admit it is pretty impressive that 2 of the biggest movers and shakers on Wall Street can be this easily connected, do you think Warren Buffett really needs advice from Henry Kravis? Wouldn't you think that Buffett already has plenty of advisors who can tell him the same things that Kravis could? Maybe even some of his advisors used to work at Bear Stearns.

[KH]

While I admit it is pretty impressive that 2 of the biggest movers and shakers on Wall Street can be this easily connected, do you think Warren Buffett really needs advice from Henry Kravis? Wouldn't you think that Buffett already has plenty of advisors who can tell him the same things that Kravis could? Maybe even some of his advisors used to work at Bear Stearns.

[Neil Choudhury]

You make a good point about Buffett's advisors, but I think Buffett could get more hard facts and inside knowledge from Kravis. Buffett and Kravis can probably relate more to each other than advisors who are not in the same situation.

[randy]

if you've never heard of theyrule.net, you might also find that site to be of interest. a slick web 2.0 (way before web 2.0) graph of people sitting on boards of directors. funny how many of these people sit on multiple boards at once.

[ardano]

WB has a history of sniffing around financial services companies for "a play." B/H is a skillful company when it comes to asset valuation. I do believe these are more short term oriented than anything else. Normally, WB demands financial protection for his "bail-out." This can take the form of a specialized class of stock/preferred, etc. or other similar put options that limit B/H risk and maximize gain. Buffet is very careful and will walk-away unless he is convinced the deal is air-tight. I agree with other posters who say, he doesn't need anyone's help to make these decisions.

[randomobserver]

Re: the connection between Buffett and Kravis... both are graduates of Columbia Business School.

[Unsympathetic]

This is absolutely hogswallop.

Buffett has said repeatedly that he views derivatives as weapons of financial mass destruction. Why on god's green earth would he turn around and invest in a company that has gynormous exposure to those financial instruments?

This entire rumor is nothing more than a classic pump and dump scheme. Buffett has recently "been rumored" to be interested in each company that has shortly thereafter fallen drastically on its own. Who, precisely, was the source of this rumor? Not Buffett himself - rather, company insiders who want to unwind their own positions.

I'll be buying puts.

[Unsympathetic]

This is absolutely hogswallop.

Buffett has said repeatedly that he views derivatives as weapons of financial mass destruction. Why on god's green earth would he turn around and invest in a company that has gynormous exposure to those financial instruments?

This entire rumor is nothing more than a classic pump and dump scheme. Buffett has recently "been rumored" to be interested in each company that has shortly thereafter fallen drastically on its own. Who, precisely, was the source of this rumor? Not Buffett himself - rather, company insiders who want to unwind their own positions.

I'll be buying puts.

you ever heard of the game kevin bacon?