Warren Buffett Bought Nebraska Furniture Mart For $60M With A Handshake Deal In 1983. He Relied On His Shopping Experience Instead Of Audits

In 1983, chairman and former CEO of Berkshire Hathaway (NYSE:BRK, BRK.B)) Warren Buffett made one of the most unconventional deals of his career. He bought 90% of Nebraska Furniture Mart for $60 million. No audit. No team of lawyers. Just a 1¼-page contract and a handshake.

The seller was 89-year-old Rose Blumkin, better known as Mrs. B. Born in Belarus, she immigrated to the U.S. with no money, no formal education and no English. She started NFM in a basement with a $500 loan in 1937 and turned it into one of the biggest furniture retailers in the country.

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Buffett didn’t rely on spreadsheets or investment bankers. He had shopped at NFM and was blown away by the prices and customer experience. That was enough. “Mrs. B simply told me what was what, and her word was good enough for me,” Buffett wrote in his 2013 letter to Berkshire Hathaway shareholders. “We completed the deal without the involvement of investment bankers or lawyers (an experience that can only be described as heavenly).”

Even more remarkably, the company’s books weren’t audited. “This purchase is being made without any audit whatsoever of the books or the inventory or anything about this business  and that’s unheard of in business,” Buffett said at the time.

Some vintage footage from back in 1983 when Warren Buffett bought Nebraska Furniture Mart.

“This purchase is being made without any audit whatsoever of the books or the inventory or anything about this business — and that’s absolutely unheard of in business.” pic.twitter.com/7slEFjILUD

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Mrs. B stayed on after the sale, working 70-hour weeks until her family pushed her into retirement at 95. Annoyed, she opened a competing store across the street. Buffett had not included a noncompete clause, so she was free to do it. Within two years, her new store was the third-largest carpet outlet in Omaha. Buffett eventually bought her out again, this time with proper legal paperwork.

Buffett often praised her business instincts. “Put her up against the top graduates of the top business schools or chief executives of the Fortune 500 and, assuming an even start with the same resources, she’d run rings around them,” The New York Times quoted him saying in 1984.