• Warren Buffett’s disdain for investment bankers led to a drop in the buyout price for Alleghany shareholders.
• Buffett offered Alleghany $850 per share, less any investment banking fees the insurance company might incur.
• The end result was an offer price of $848.02, about $27 million less than Buffett was offering.

Warren Buffett has never had a favorable view of investment bankers, and that showed with Berkshire Hathaway’s takeover of Alleghany.

Berkshire agreed to buy the insurance company for $11.6 billion in cash, or $848.02 per share. But according to SEC filings, the actual takeover deal is $850 per share, less any investment banking fees Alleghany incurred during the deal-making process.

“Each share issued and outstanding immediately prior to the Effective Time will be canceled and extinguished and will be converted into the right to receive $848.02 in cash, being $850.00 per share less any financial advisory fees due to the financial advisor in connection with the merger,” the SEC Filing said.

Bloomberg reported that Buffett specifically warned Alleghany that he didn’t want Berkshire to foot the bill for his investment banking fees, citing a person with knowledge of the matter. The end result is that Buffett subtracts $27 million, or the fee Alleghany pays Goldman Sachs to be his adviser during the deal process, from the takeover price.

Buffett’s stance against investment bankers was laid out in Berkshire Hathaway’s 2014 annual letter to investors, in which he said, “Money brewers aren’t cheap.”

“Many mouths with expensive tastes are then clamoring to be fed – among them investment bankers, accountants, consultants, lawyers and capital reallocators such as leveraged buyout operators,” Buffett added in the letter, published in 2015.

Buffett himself often closes buyout deals for Berkshire Hathaway without using an investment bank. Instead, the conglomerate relied on Berkshire Vice Chairman Charlie Munger’s former law firm for transaction advice.

But there’s one investment banker that Buffett has no problem paying, and that’s former Goldman Sachs chief executive Byron Trott. Buffett leaned on Trott when Berkshire acquired food retailer McLane from Walmart in 2003 for around $1.5 billion.

“I must add that Byron has now been instrumental in three Berkshire acquisitions. He understands Berkshire far better than any investment banker we have spoken to and – it pains me to say this – earns his fees “Buffett said in the 2003 Berkshire Letter, which came out in 2004.