Warren Buffett's Scout Inside Europe's Biggest Economy

By Nicole Friedman Features Dow Jones Newswires

When Zypora Kupferberg was charged with finding buyers for a German motorcycle-apparel company, she placed one name at the top of her list: Warren Buffett.

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"I said, 'I am 100% sure I will find a way that my letter will be on his desk,' " Ms. Kupferberg said.

A year later, Mr. Buffett's Berkshire Hathaway Inc. bought the company for more than EUR400 million ($448 million). The Omaha, Neb., billionaire then asked Ms. Kupferberg to bring him similar deals in the future -- the bigger, the better.

Berkshire rarely relies on people outside the company to educate potential targets. Yet with that one deal in 2015, Ms. Kupferberg became Mr. Buffett's scout inside Europe's most powerful country.

"It's very helpful for us to have somebody that actually understands us, " who can represent Berkshire's interests in Germany, Mr. Buffett said.

Ted Weschler, one of Mr. Buffett's portfolio managers, added: "She's our eyes and ears in Germany."

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Ms. Kupferberg's role could become more crucial as Mr. Buffett looks for new targets in unfamiliar markets. Berkshire had $96.5 billion in cash as of March 31, and Mr. Buffett told shareholders in May that he is eager to spend it. The conglomerate owns only a handful of businesses outside the U.S., including Netherlands-based IMC International Metalworking Cos.

The story of this unlikely pairing took six years to unfold. It began with Mr. Buffett's much-publicized tour of Europe in 2008. He was there to drum up potential deals but was unable to find an immediate target. Though she hadn't met Mr. Buffett, Ms. Kupferberg suspected she could turn that around.

Ms. Kupferberg, 50 years old, was born in Mönchengladbach, Germany, to two Holocaust survivors. Her father co-founded an import-export business in Israel after surviving multiple concentration camps; his work eventually took him to Germany.

"I'm from a family history [where] we are not used to making plans," Ms. Kupferberg said. "My parents educated us, 'Everything can change the next day.' "

After a disease from a tick bite prompted her to quit a job in private equity and venture capital, Ms. Kupferberg opened an independent consulting firm in Cologne in 1997 and started working with family-owned businesses in Germany. She gained a reputation as an astute deal maker, but was largely unknown outside of the country.

She knew from experience that German companies, which typically have strong connections to their local communities and savings banks, could be wary of foreign investors. Berkshire, however, could be a good fit for such companies because it tends to seek out successful firms with strong competitive advantages that can be left alone.

In 2014, one of Ms. Kupferberg's clients, Ute Louis, wanted to sell Detlev Louis Motorrad-Vertriebsgesellschaft mbH, a motorcycle helmet and equipment retailer. Ms. Louis, who inherited the business from her late husband, had some tricky requirements: The management team had to stay in place and the company had to keep its headquarters in Hamburg.

"I thought, this is a perfect match" for Berkshire, Ms. Kupferberg said. "I think we can offer to Berkshire a company, even if it's for [Mr. Buffett] comparably quite small, but a company which exactly fits into his investment strategy," she recalled thinking.

Other advisers thought contacting Mr. Buffett would be a waste of time, she said, but Ms. Louis liked the idea. So Ms. Kupferberg reached out to an Omaha investment banker she met years earlier in a Frankfurt law office: Jim Zipursky.

"Jim told me that he thinks that the company might be too small for Berkshire," she said. "I told him I am convinced that this could work and that I will find a way to contact him."

Mr. Zipursky told Ms. Kupferberg that his father, Morley, also a banker, knew Mr. Buffett through Stan Lipsey, a mutual friend who worked for Mr. Buffett for years. He offered to deliver a letter and a deal proposal straight to the billionaire's desk.

"It was an idea that just came out of our discussion," Mr. Zipursky said. "As we talked about the opportunity, it became clear that Berkshire Hathaway would be the best possible acquirer for that company."

The 1 1/2 -page letter, signed by Morley Zipursky, introduced the company, and Mr. Buffett responded within days asking for a price. He then said that he liked the company but the price was too high. A few months later, Ms. Kupferberg and Mr. Zipursky tried again, with a tweaked offer. Mr. Buffett approved the new offer, and Mr. Weschler traveled to Germany to meet Ms. Kupferberg and the company's owner and managers.

At Mr. Weschler's first meeting with Ms. Louis, Ms. Kupferberg helped translate, Mr. Weschler said. The deal closed in 2015. "Halfway through the process, I thought that, really, I'd like to be on the same side of the table as Zypora sometime," Mr. Weschler said.

Last year, Ms. Kupferberg helped arrange a meeting for Mr. Weschler with the heads of the 25 largest German savings banks. He was the first guest to meet with that group of executives, said Karl-Peter Schackmann-Fallis, managing director of the German Savings Bank Association.

In May, Ms. Kupferberg traveled to Omaha for her first meeting with Mr. Buffett. In his office, the two discussed potential investments and the economic situation in Germany and Europe. As they posed for a photo, Mr. Buffett placed his left arm around Ms. Kupferberg's shoulder.

"She has a very good sense of what might fit or not," Mr. Buffett said.

(END) Dow Jones Newswires

June 20, 2017 05:44 ET (09:44 GMT)