The Only Banker Warren Buffett Likes

Is Goldman Sachs Group’s Byron Trott better than an investment banker?

Warren Buffett seems to think so. You see Buffett famously disdains investment bankers. He even boasts in his latest letter to investors of how his Berkshire Hathaway did its largest cash purchase in the company’s history—the $4.5 billion acquisition of a majority of Marmon Holdings from Chicago’s Pritzker family—while “employing no advisors” and that the price was arrived at “using only Marmon’s financial statements…no nit-picking.”

But that “no advisors” is open to interpretation, as Buffett singles out the participation in the deal of Trott, vice chairman of investment banking and the head of Goldman’s Chicago office and its Midwest banking group. While Trott technically was the Pritzker’s adviser, Buffett relies on him as well: “Byron Trott of Goldman Sachs–whose praises I sang in the 2003 report–facilitated the Marmon transaction. Byron is the rare investment banker who puts himself in his client’s shoes. Charlie and I trust him completely,” referring to Berkshire Vice Chairman Charlie Munger. In 2003, Buffett admitted that Trott “earns his fee.”

In the 2008 letter, Buffett also engaged in a little M&A mea culpa, admitting that his purchase of the Dexter shoe business in 1993–not a Trott deal–for $433 million was based on the evaporation in a few years of a competitive advantage he thought would be more durable. Compounding the error was using 25,203 of Berkshire A shares as currency. “That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business–one now valued at $220 billion–to buy a worthless business,” he writes. It was, he says, his worst deal yet, though he bets he will make more mistakes. His folksy explanation for it all: A line from a Bobby Bare country song: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.”

Trott, a Midwesterner like Buffett, is one of Goldman’s longest-serving veterans, with more than 25 years at the firm, 14 of them at the partner level. He is one of the few pre-IPO partners still at Goldman. Buffett, 77 years old, is considering four Berkshire Hathaway candidates as successors. Will they need Trott’s deal-making acumen as well?