How Warren Buffett is preparing for his 60-year Berkshire Hathaway reign to end

Berkshire Investment

The legendary investor took control of Berkshire in 1965 and gradually acquired a number of companies, including Geico and See's Candies, and built billion-dollar stakes in public companies including Apple and Coca-Cola.

But at 94, the tycoon knows the end of the Buffett era is near -- and he has carefully prepared for his exit.

Buffett has warned his shareholders that his time in power is coming to an end. He praised Greg Abel and set the stage for his planned successor. He is also eager to protect his legacy and ensure his vast wealth does not go to waste when he is gone.

"Succession planning for a company led by an iconic CEO is the most important thing in corporate governance," Lawrence Cunningham, director of the Weinberg Center for Corporate Governance at the University of Delaware and author of several books about Buffett and Berkshire, told Business Insider.

Cunningham said Buffett's group is "an exemplary and underappreciated model of how to do this well," adding that it "not only set the stage for Greg to succeed Warren as CEO" but also prepared shareholders for the fact that his company would no longer have a controlling shareholder.

The deal-seeking billionaire has repeatedly assured shareholders that Abell is a worthy successor. In his new letter, he wrote that in those rare moments when opportunities are everywhere, Abell "has clearly demonstrated his ability to act like Charlie in such moments," referring to his late business partner, Charlie Munger.

Buffett joked at last year's annual meeting that shareholders "won't have to wait long" for a management change. "I'm feeling fine, but I know a little bit about actuarial tables," he joked.

In his latest letter, the investor mentioned that he needs a cane to walk, possibly because he is "considering stepping down as CEO in the near future," David Kass, a finance professor at the University of Maryland who has closely followed Buffett's company for four decades, told BI. He said the 90-year-old could announce his decision at Berkshire's annual meeting in May.

Cass told BI that Berkshire's $334 billion in cash reflects a "desire to hand Greg a relatively clean image" and allows him "to more easily perform the core function of a CEO, which is capital allocation."

Notably, he and his investment managers have sold a number of small but long-term investments in recent years, including General Motors and Procter & Gamble.

They have also redeemed $158 billion worth of shares on a net basis in the past two years, helping Berkshire's cash reach record levels. Their efforts could leave Abel with enough money to spend on shares or finally make the huge acquisitions that have eluded Buffett for years.

Buffett Plan For Tax

Buffett and his associates could scale back on buying, increase sales and halt buybacks, as stock valuations have become too expensive. But they could also see value in leaving a treasure chest for Abel, from which he can draw and use whatever he wishes.

Buffett said last year that after his death his roughly 14% stake in Berkshire - worth more than $150 billion - would go into a trust, with his three children serving as trustees, and they would have to vote unanimously on how the funds would be spent.

This plan not only protects the money from tax collectors and puts it to good use, but is also intended to deter activist investors, who might otherwise try to buy up Buffett's shares after his death and seek the liquidation of his group.

"I treat Berkshire Hathaway the same way an artist treats a painting, except that the canvas is infinite," Buffett said in 2016. He emphasized his vision to make the company last for generations.

Indeed, Buffett's efforts to prepare his shareholders for the inevitable, express his confidence in Abel and set him up for success, and protect his personal stake in the business all show that he is dedicated to making sure Berkshire continues to prosper long after he is gone.

The legendary investor took control of Berkshire in 1965 and gradually acquired dozens of businesses, including Geico and See's Candies, and built billion-dollar stakes in public companies including Apple and Coca-Cola.

But at age 94, the legendary businessman knows the end of the Buffett era is near -- and he has carefully prepared for his exit.

Buffett has warned his shareholders that his time is running out. He praised Greg Abel and set the stage for his planned successor. He is also eager to protect his legacy and ensure that his vast wealth is not wasted.