The siblings had to start this project from scratch, which was not easy. In retaining advisers, they considered all the alternatives: an employee stock ownership program to vest ownership in the employees, an initial public offering (IPO), a merger with a comparable furniture store chain, or sale to a number of larger chains or financial buyers. At first, they opted for the IPO, as pursuing it enabled the preservation of other options in case the IPO did not succeed. Preparing for the IPO took work—meeting minimum volume levels and numbers of stores in additional cities and hiring professional management. In the end, however, they realized that neither the IPO nor the other solutions provided the liquidity, autonomy, and permanence they sought.
That’s when it occurred to Wolff to connect with Berkshire. He had heard about it often over the years from the Blumkins and the Childs. A few days before Berkshire’s 1997 annual meeting, Wolff asked bankers at Salomon Brothers to help him reach Buffett; Wolff soon heard from Robert Denham, a fellow Texan and counsel to Berkshire, whom Buffett had enlisted to help rehabilitate Salomon after its bond trading scandal in the 1990s. At Buffett’s invitation, Wolff attended the Berkshire meeting and was impressed with the culture he detected.
A few days later, Buffett and Wolff met in New York. Buffett offered a price and said, in line with Berkshire practice, that it was non-negotiable. Wolff tried to negotiate anyway but to no avail. In the end, the deal made sense, not only in its strict financial terms but in giving Wolff the intangibles he sought for his company and his family, notably autonomy and permanence.
All the planning in the world cannot solve every unique family business problem. Few problems are more acute than those facing senior family members torn between a desire to protect the family and to be free of the business. But it is this kind of dilemma that Berkshire culture can fix.
One such case concerned Helzberg Diamond Shops, Inc., a third-generation jewelry chain Berkshire acquired in 1995—the same year it acquired RC Willey. Helzberg was founded in 1915 by Russian immigrant Morris Helzberg.27 All Morris’s children worked in the store, and the youngest, Barnett, at age fourteen, took leadership when Morris suffered a disabling stroke and the older brothers were off at college or fighting in World War I. Barnett expanded the business from a single Kansas City store to a chain of dozens before handing it over to his son Barnett Jr. in 1963.
Barnett Jr., who had worked at the company since 1956, faced a shifting demographic: most Helzberg stores were in downtowns where traffic was declining as shopping malls emerged in the suburbs. To address the shift, Barnett Jr. first began closing the downtown stores, shrinking the chain’s size to fifteen, before rebounding with an aggressive expansion program during the 1970s. Barnett Jr. launched a marketing campaign that became a pop sensation: “I Am Loved.” The company put this slogan on lapel pins and buttons it gave away in the stores. Evoking the era’s love-in spirit was the tag line: “If you can’t give your love a diamond, at least speak your feelings with an I Am Loved button.” The slogan—still strong today—soon appeared on drinking glasses, golf balls, and souvenir items. They were handed out to millions of potential customers.
By 1989, Helzberg had grown to eighty-one stores, and Barnett Jr. was beginning to tire of his job. He realized he was overworked the day his seven-year-old son wrote “sleep” on a school assignment asking what his father did best.28 Barnett Jr. opted to curtail his role and turn the presidency over to Jeffrey Comment, who had been an executive at John Wanamaker & Co., a Philadelphia-based department store. Comment was the first person outside the Helzberg family to hold an executive position at the company. He drove rapid growth by opening more and larger stores, including “superstores” opened in strip malls.
In 1994, Barnett Jr., mulling the future of the family business, considered strategic options. At the time, the company was the nation’s third largest jewelry store chain, with 143 stores and annual sales nearing $300 million. Barnett Jr. consulted financial firms in New York but, averse to layoffs and divestitures, dismissed typical options such as an IPO or selling to a competitor.29
Barnett Jr. had mixed feelings common to heads of family businesses. He acknowledged that although Comment had helped relieve the managerial burden, he still felt a great responsibility. He sought a way to remove this weight while preserving the business. His dream, having been a Berkshire shareholder since 1989 and having attended its annual meetings, was selling to Berkshire.30 The dream came true by chance.
In New York meeting with Morgan Stanley in May 1994, a week after that year’s Berkshire annual meeting, as Barnett Jr. strolled on Fifth Avenue, he happened to see Buffett near a crosswalk at 58th Street.31 Barnett Jr. introduced himself and gave Buffett a short “elevator” pitch about Helzberg Diamonds.32 Buffett invited Barnett to send him the details. Helzberg’s financial picture was impressive, and Buffett loved the story of a single shop becoming a large chain. Sales growth was strong: $10 million in 1974; $53 million in 1984; $282 million in 1994. The stores were large, on average ringing up $2 million in annual sales, a far greater per-store productivity than its competitors.