In simple terms: A negotiated whole-business purchase looked cheap but did not have the economics of a durable compounding retailer. Hochschild, Kohn & Co. is included in the Buffett Partnership special-situations record with an evidence grade of A - named and directly described in the letters.

What Buffett saw

In 1966 BPL and two partners bought the Baltimore department-store business through a negotiated whole-business transaction. It was a practical extension of the same valuation principles Buffett applied to marketable securities.

This was Buffett's first negotiated acquisition of an entire business through the Partnership. It looked cheap enough to buy, but operating a retailer teaches a different lesson from owning an undervalued stock: inventory, stores and competition can keep demanding capital even when the purchase price seems reasonable.

How the situation was meant to work

By 1969 DRC sold the business for cash plus two non-interest-bearing notes. Buffett explicitly discounted the notes to an estimated present value instead of treating the headline future payments as cash in hand - a simple but important habit when reading acquisition consideration.

DRC sold the business in December 1969 for $5,045,205 cash plus non-interest-bearing notes that Buffett valued at about $6 million, for roughly $11 million of effective consideration.

The timeline, capital and risk

Capital disclosed: Later Buffett recollection: about $6 million of equity for a roughly $12 million purchase; BPL held it through DRC with two 10% partners.

Time frame: First half of 1966 to 1 December 1969.

The numbers do not support a clean BPL IRR. The business had debt and working capital, BPL shared ownership with partners, and the final consideration arrived partly through notes. Subtracting a recalled equity contribution from a sale headline would be false precision.

What happened

Outcome: DRC sold it to Supermarkets General for effective consideration of about $11 million.

What the return means - and the lasting lesson

Return record: Exact investor-level IRR is not disclosed.

The sale proceeds cannot simply be compared with a recalled equity contribution. Debt, working capital, interim cash flows, co-ownership and the time value of notes all affect the investor-level return.

This guide is educational information, not a recommendation, investment advice or a substitute for reading the underlying disclosure.