Warren Buffett purchases utility and pipeline companies for Berkshire Hathaway (NYSE: BRK-A) for many of the same reasons that small cap utilities such as Active Power (NASDAQ: ACPW), GenOn Energy (NYSE: GEN) and GreenHunter Energy (AMEX: GRH) should be considered by small cap investors looking to proft from takeover activity.

This will probably be a record year for mergers and acquisitons.  Already, more than 1270 have been reported through May 2011, a value of $476 billion.  Interest rates are low, companies have more than $2 trillion in cash, and many are looking to expand through mergers and acquisitions.  In addition, hedge funds and private equity groups are loaded with cash and have to add to their holdings to satisfy investors.  These conditions propitious for corporate takeovers should continue well into 2013.  Interest rates will not be raised in a presidential election year.

Utility companies are also easy to finance.  With established customer bases and a robust cash flow, lenders are more apt to underwrite these acquitions.  Financial institutions can be assured of repayment when lending in the utility sector.  In addition, there are rarely ugly surprises after buying a utility company.  They are easy companies to understand, another feature valued by Warren Buffett.

Buffett also likes to buy companies with strong cash flows.  Utility companies are excellent for this with a stable customer base.  The cash flow generated by these companies can be deployed for other axquisitions.  Central Vermont Public Service (NYSE: CV), the subject of a recent article on www.smallcapnetwork.com, was recently bought by another utility company.  Small cap companies in the utility sector will continue to be appealing as takeover candidates