Learn M&A from LV Group - Acquisition without merger
What to watch: LVMH has set off a storm in the global luxury goods industry with its hasty merger method. In Arnault's view, the United States is obviously more capable of stimulating the vitality and spirituality of each brand under the group than the Republic of China.
Louis Vuitton, Mo?t & Chandon, Dior, Givenchy, Clinique, Guerlain and other exquisite and unique world-famous brands are under the wings of LVMH Group. Group CEO Bernard Arnault relies on little-known holding companies to successfully control the operations of these well-known brands. There is no doubt that operating and managing these top brands is not an easy task.
Bernard Arnault, a thin, conservative Frenchman, said: "Effective management depends mainly on our corporate culture. If they are not given enough freedom, they will not be able to create A great product with the necessary aura. The company's success will depend largely on how well it manages these two seemingly contradictory forces."
The company encourages bags for less than $500, or $200. The coexistence of different products such as champagne in the US dollar range, while being able to firmly control and promote the development of the overall business - this left-brain/right-brain conundrum has confused many people. Arnault was recognized as Europe's most feared "corporate sniper" for his success in solving this problem.
The birth of Sniper
Like competitors such as Switzerland's Richemont Group and the United States' Happy Trademark, LVMH has collected a large number of brands with different characteristics. In a relatively short period of time, During the period, through a series of bold acquisitions and takeovers of certain old companies, LVMH’s sales suddenly ranked first in the industry.
The entire history of LVMH can be traced back to the 1970s and 1980s. In 1977, control of the Louis Vuitton brand fell into the hands of Henri Lacamier, a former steel company owner who later became a member of the Louis Vuitton family through marriage. Through the transformation of Louis Vuitton, the company's annual sales increased from the original 20 million US dollars to 2.5 billion US dollars in just 10 years.
In 1984, Arnault was engaged in real estate development business in a Florida real estate company founded by his father. But when the opportunity arose to acquire the fashion house Dior, he believed he had found a rare pearl.
In 1987, Louis Vuitton merged with Mo?t Hennessy, a luxury French champagne and brandy brand.
Since the first day after the merger, LVMH has been in constant trouble. Debates over who should take charge of the company and how to promote the company's development have never stopped at LVMH. Arnault was invited to increase his shareholding in LVMH and soon took control of Group 43. Christian Dior perfume is firmly in the hands of Arnault. Less than 18 months later, half of Louis Vuitton's assets fell into Arnault's possession.
The victory in the bloody battle for the leadership of LVMH laid the foundation for the future "Arnault Empire". Arnault quickly acquired a large number of well-known brands for his kingdom: Givenchy, Clinique, Guerlain, Christine Lacquer, Kenzo, Berluti, Lowe, Fred, as well as the DFS duty-free store.
In 1999, Arnault acquired the Italian leather products giant Gucci. But thanks to the help of another retail and distribution company headed by French billionaire Fran?ois Pinault, Gucci was saved from being acquired.
After suffering this setback, LVMH began to aggressively enter the high-end luxury watch market. It successively acquired part of the shares of Ebel, Cormet and Tag Heuer, suddenly becoming the third largest luxury watch group in the world.
In addition, LVMH also acquired British Thomas Pink shirts, some unknown small cosmetics companies, an auction house and the French Chateau d'Yquem.
In addition, there are rumors that LVMH is one of several buyers that may acquire the Italian design studio of Giorgio Armani.
In 1999, the LVMH Group's total annual revenue reached US$8.2 billion, an increase of 23% from the previous year. Excluding acquisition expenses, sales increased by approximately 15%. Net profit for the year nearly doubled to $665 million. Although the market was filled with concerns about an economic recession in Asia at the time, LVMH's shares listed on the Paris Stock Exchange in 1999 rose across the board.
In addition to his success in the luxury consumer goods and fashion products business, Arnault has a special liking for the Internet business. Through a family holding company, he also has investments in the Internet industry. In March 2000, as the first Internet stock listed on the main board of the Paris Stock Exchange, Arnault was estimated to have earned more than $1 billion in income. The website he ran, boo.com, unfortunately collapsed, and Arnault suffered certain financial losses, but the return on other investments was very high. In order to promote brands such as Sephora and LVMH to the Internet, Arnault boldly founded sephora.com and Eluxury websites.
In early 2000, in order to expand its distribution network, LVMH acquired Cruiseline Services, a mobile duty-free store. In addition, it also acquired a majority stake in Italian design company Emilio Pucci.
However, the grand gesture that best demonstrates Arnault’s style and charm as a master of brand management should be his 1999 relationship with Italian dignitary Patri, who was then the head of the Italian leather products group Parada. Joining forces with Gio Bertelli, the most charming and tasteful company in the fashion world, it is also the acquisition of Fendi, a Roman luxury design company that is generally favored by the industry.
Pursuing the Fendi sisters
The five sisters of the Fendi family each own part of the assets of the family industry. In the end, Arnault won the hearts of the five sisters, mainly because Arnault allowed the Fendi sisters and the company's most popular designer Karl Lagerfeld to enjoy the power to participate in the company's business-this has always been Arnault's A major feature of acquisitions.
When Arnault and Bertelli, two rivals in the business war, began to pay attention to the deal, they won the final victory although they were a step late. After they completed the acquisition of Fendi with a valuation of US$8.5 billion, they also obtained a controlling stake in Fendi 51, defeating rivals such as Gucci. The statement issued by the transaction said: The Fendi sisters hold the remaining 49% of the company's shares and will continue to hold many important positions in the company, such as chairman and board secretary, responsible for product style, production planning and external communication.
People familiar with the transaction revealed that the final decision was made by the Fendi sisters together with designer Lagerfeld. Compared with other teams such as Gucci, they preferred the management of Arnault Bertelli. team. The Fendi sisters and Lagerfeld must stay with the company. "This family must continue to stay in the company. Their inspiration and creativity are very important to the development of the company." Arnault said.
Arnault has never set any boundaries for the Fendi sisters or Lagerfeld to prevent Fendi products from overlapping in style and concept with other products under LVMH. On the contrary, Arnault believes that this issue is still left to the Fendi sisters and the designer himself to think about. He believes in each other's aesthetics and judgment. He said: "Fendi has a distinct brand personality. It is completely different from other brands such as Vuitton or Dior. The Fendi sisters and Lagerfeld have their own unique creativity and talent, and their understanding of Fendi is profound and unique. They will naturally design and develop Fendi products according to their own understanding and maintain Fendi’s consistent brand and image.”
Don’t feel like P&G
Arnault’s brand management philosophy. The core idea is to give full autonomy to all brand managers under LVMH. Managers own a stake in the brand company they run, which is a financial incentive for them.
Individual brands also receive the support they need from the parent company. In principle, they bear certain obligations to the parent company, but they can operate their respective brands boldly and innovatively according to their own inspiration and creativity.
Arnault believes that every brand can be run like a family business. “Many of these well-known brands originally started as family businesses and were created by different family operations. Although these brands are now members of the largest luxury consumer goods group in the world, they should be allowed to maintain the feeling of family operations. , Perhaps this can fundamentally maintain the successful operation of these brands, and this is true corporate management. Each brand manager must operate and manage like his own brand, and of course he can enjoy full freedom.
“Every employee in the company seems to work in a medium-sized enterprise, and his or her life is so closely related to everything in the company. Don’t let them feel that they are working in a large enterprise. Work at, say, Procter & Gamble... don't feel that way. Our group is fully capable of continuous innovation and inspiration, because we are the largest and most outstanding luxury goods group in the world, and we can attract the best talents and young management. ”
But an inevitable crisis in such a choice of full autonomy is the overlap between various businesses, and even internal competition. “When the company planned acquisitions, it had already considered and selected those market areas that it has not yet participated in,” Arnault explained. “We jointly acquired Fendi with Parada because we have not yet participated in this part of the market. Therefore, the group In the process of gradually and rapidly improving its investment portfolio, it will try to avoid direct competition and business overlap between business departments, and try to make the market positioning of each subsidiary different. In other words, if consumers buy Louis. Vuitton brand products, and Fendi consumption, should not be considered direct competition.”
In fact, some companies try to let one designer manage the design and style of many brand products to ensure uniformity. , but in Arnault’s view, such an approach is wrong.
"This approach is wrong. The correct approach should be to allow each brand to have its own independent set of innovative design and image maintenance personnel. We allow each brand to enjoy full autonomy in its operations. Implement highly decentralized management. "Arnault believes that the value of the LVMH brand itself lies in: it is a commitment and an incentive for existing and potential employees; for investors, it means confidence.
"LVMH is a company brand, not a product brand. Regarding the fact that well-known brand products such as Louis Vuitton, Fendi, Givenchy, and Clinique are originally produced by the same group company, consumers Maybe they are completely unaware or not interested. In fact, there is no need to know that each of the above brands should be completely independent of each other. But from a business perspective, the operators of each of the above brands, including their employees, should be very clear: We are part of the world's largest luxury consumer goods group, which is very important for the maintenance of the company's overall image. I personally think that LVMH has successfully positioned itself as the owner of all these big brands. This corporate image is also the success of LVMH. The key. ”