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What's going on?

Warren Buffett’s been comparing the markets: his conglomerate Berkshire Hathaway announced on Monday that it’s agreed to buy insurance company Alleghany for $11.6 billion.

What does this mean?

Buffett’s been searching for Berkshire Hathaway’s next big investment for a while now, and said just last month that he was having a hard time finding it. But it looks like perseverance paid off: Berkshire announced on Monday that it’s agreed to buy fellow conglomerate Alleghany – whose core business is property and casualty insurance – for $11.6 billion in cash, 29% more than the company was worth on average over the past 30 days.

The deal – Berkshire’s biggest since 2016 – isn’t its first move into insurance. The company owns plenty of firms – like Geico, one of America’s biggest car insurers – in the space, and the industry’s already played a big role in growing Berkshire into the conglomerate it is today, boasting a market value of more than $750 billion.

Why should I care?

The bigger picture: Talk about cash to splash.
$11.6 billion sure sounds like a ludicrous amount of money, but it counts for less than 10% of Berkshire’s nearly $150 billion in cash. So even after making one of its five biggest deals ever and pledging to keep $30 billion in cash last month, Berkshire still has about $100 billion left that it could splash on even bigger deals in the future.

Zooming out: Software’s looking good.
Berkshire isn’t the only one making deals this week: private equity (PE) firm Thoma Bravo announced it’s buying Anaplan – a company that provides forecasting software to businesses – for $10.7 billion. The deal’s the latest in a bunch of PE takeovers in the software sector, including that of cyber security company McAfee last year. Some reckon it could be a sign that market volatility and higher costs of borrowing haven’t put firms off the industry, so more deals could be on their way this year.

Originally posted as part of the Finimize daily email.

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