How a man sold his company to Warren Buffet for $100,000 salary and made billions for Berkshire shareholders

In his recent annual letter to Berkshire Hathaway shareholders, Warren Buffet shared a remarkable story of Pete Liegl, the founder of an Indiana-based company, Forest River.

Pete died in November 2024, still working at 80. Around 19 years back, he had sold Forest River to Buffet but requested to keep running the business.

During his lifetime, Pete generated billions of dollars in wealth for Berkshire Hathaway shareholders, despite remaining relatively unknown to many of them, according to Buffet.

The story

Buffet first heard about Forest River, a recreational vehicle manufacturing company founded and managed by Pete, on June 21, 2005, through a letter from an intermediary.

The letter mentioned that Pete especially wanted to sell his company to Berkshire. He had also clearly mentioned the price of the company that he expected. Buffet said he liked Pete's "no-nonsense approach"

On June 28, 2005, Buffet met with Pete and his family. During the meeting, Buffet wrote, Pete "assured me that he wanted to keep running the business but would feel more comfortable if he could assure financial security for his family."

Buffet decided to buy the company at the price quoted by Pete and also allowed him to run the company.

When it came to discussing the compensation, Buffet said he would accept whatever Pete wanted. But this is not the approach Buffet would like to recommend for general use.

"I asked Pete what his compensation should be, adding that whatever he said, I would accept. (This, I should add, is not an approach I recommend for general use)," Buffet said.

But Pete's response surprised Buffet.

The Forest River founder said he would take only ₹100,000 per year as he didn't want to make more than his boss.

"Pete paused as his wife, daughter and I leaned forward. Then he surprised us: 'Well, I looked at Berkshire’s proxy statement and I wouldn’t want to make more than my boss, so pay me $100,000 per year.'”

Pete, however, asked for a 10% annual bonus from any earnings above what his company was making then.

"After I picked myself off the floor, Pete added: 'But we will earn X (he named a number) this year, and I would like an annual bonus of 10% of any earnings above what the company is now delivering'.”

Buffet agreed to this demand, adding, "OK Pete, but if Forest River makes any significant acquisitions we will make an appropriate adjustment for the additional capital thus employed."

Though Buffet never defined the words "appropriate" or "significant" this didn't ever cause any problem till the time Pete lived.

After the deal, Buffet and his family went for dinner at Omaha’s Happy Hollow Club and "lived happily ever after."

Buffet said that during the next 19 years, "Pete shot the lights out. No competitor came close to his performance."

"Every company doesn’t have an easy-to-understand business and there are very few owners or managers like Pete...I’ve observed…that a very large portion of business talent is innate with nature swamping nurture. Pete Liegl was a natural," Buffet said.