Art of a deal: how LVMH paid up for Tiffany

LVMH, luxury retailer and owner of brands including Louis Vuitton, Hermes, Dom Pérignon and Sephora has a new jewel in their crown: Tiffany’s. The French multinational paid $16.6 billion for the American icon.

The acquisition of Tiffany will catapult LVMH to the top of the rankings for market share in branded jewellery, one of the best-performing luxury categories in 2018, which Bain consultants predicts will grow a further 7 per cent this year. By adding Tiffany to its stable of brands, LVMH will more than double its market share in jewellery to 18.4 per cent, surging ahead of Johann Rupert’s Richemont, at 14.8 per cent, according to Bloomberg Intelligence. Until now Richemont, owner of Cartier and Van Cleef & Arpels, has long dominated this part of the industry.
LVMH will seek to use the approach that it applied to Bulgari. Since it bought Bulgari for $5.2bn in 2011, LVMH has invested in the stores to boost the sales density; focused the product ranges, ramped up marketing and communications, and elevated the brand to focus on high-end jewellery. Under LVMH’s ownership, sales have doubled and profits have increased fivefold.

The interesting thing I found in this piece is LMVH’s CEO Bernard Arnault felt it necessary to tip off the President about the deal.

At the opening of a Louis Vuitton leather factory in Texas last month, President Donald Trump was given a hint about an upcoming deal that would be the luxury sector’s biggest ever. “I told the president I would buy something significant in the US, but I didn’t tell him the name,” said Bernard Arnault…Only two days before the ribbon-cutting ceremony, where the guest appearance by Mr Trump caused controversy for LVMH, Mr Arnault had sent a lieutenant to New York to approach Tiffany.

The move certainly makes sense for the luxury behemoth. It adds a globally recognizable brand to their arsenal and if they can execute their playbook, it should be quite a profitable. That said, the premium over the current market cap is quite high - $16.6bn is a lot of little blue boxes. However, if it helps curry favor with Mr. Trump perhaps the price tag becomes more palatable.


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