Lessons Learned in the Tiffany Vs. LVMH Fight

Evan Clark
·6 min read

Bernard Arnault’s roughly $16 billion acquisition of Tiffany & Co. — at last nestled into the jewel box of LVMH Moët Hennessy Louis Vuitton — is a master class in both mega dealmaking and how to brawl in luxury.

While the size of the deal (Arnault’s biggest) and the way it wove through the pandemic (and the French government) make it a singular transaction, there are some takeaways for other dealmakers and reminders that, when the stakes are high, the gloves can always come off.

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And there could be plenty of chances to put the lessons learned to good use with companies sitting on billions of dollars of emergency cushion that could be put to work as COVID-19 vaccines open the world back up.

“Those who are survivors coming through the pandemic now are pressing their tactical advantage and M&A is part of that,” said David Shiffman, managing director and co-head of investment bank PJ Solomon’s global consumer retail group.

That includes both consolidations and moves to pick up new technologies, such as VF Corp.’s $2.1 billion-plus acquisition of Supreme or Lululemon Athletica Inc.’s $500 million purchase of interactive workout platform Mirror.

“You have a combination of strategics engaging the new economy, you have a return of the multibillion deal and we think there’s just more momentum,” Shiffman said. “You’re going to see more deal activity.”

Here, some guidelines for corporate battle in fashion, seen through the lens of the biggest deal in the last decade.

If You’re Going to Fight, Bring a Fighter

Arnault relentlessly built LVMH piece by piece, steadily consolidating much of the European fashion industry into a giant with a market capitalization of 256 billion euros that is feared, admired and emulated the world over.

He is said to have spent years coveting Tiffany, one of the very few true American luxury brands, and made his move in late 2019, pursuing and winning the company for $135 a share.

But deals are just promises and paperwork until they’re done and after the pandemic hit and social justice protests revealed a fractured market, LVMH grew wary about the company and the price it agreed to pay and ultimately tried to walk away in September. The initial reason given was an unusual request from the French government in the midst of a trade dispute with Washington, but the reasons seemed commercial at heart.

There was some recent precedent holding that one could walk away from a deal by making some noise — such was the case with Sycamore Partners, which dislodged itself from its agreement to buy control of Victoria’s Secret.

However, when LVMH tried to leave Tiffany at the alter, the jeweler’s chairman, Ralph Lauren Corp. veteran Roger Farah, was there, ready with a quick lawsuit and lobbying rhetorical bombs.

“We believe that LVMH will seek to use any available means in an attempt to avoid closing the transaction.…As we are not aware of any other French company receiving such a request [from the government to delay a deal], it is all the more clear that LVMH has unclean hands,” Farah said.

After much back and forth and just before depositions from the major players, including Arnault, were about to begin for a January trial, the two sides came back together for a deal at $131.50 a share, a 2.6 percent discount that saved Arnault about $420 million.

One dealmaker who declined to be named — they hate taking sides in public when they don’t have to — said: “Roger Farah was a rock star here, keeping one of the richest men on the planet in check. Arnault’s a guy who’s used to getting his way, he probably underestimated Roger Farah’s resolve. Arnault certainly didn’t get a huge discount relative to what he was hoping for. This is a good old fashion bar brawl, these are just bare-knuckled figures who are titans of industry.”

But Try to Keep It Private

When dealmaking becomes outright bloodsport and headline news, damage can be done on both sides with reputations, future deals and the potential business combination at stake.

Attorney Douglas Hand, cofounder of Hand Baldachin & Amburgey, said it would be better to keep the fight out of court if possible.

“Once you go to court and file the complaint, it’s public and the volley of negative statements on both sides about the other have been damaging, have eroded value,” Hand said. “So that is a tough needle to thread. How do you appropriately threaten without actual litigation?”

Arnault’s reputation as a savvy and hard-nosed dealmaker is certainly intact — and any number of brands and designers would love to be part of the LVMH empire. But even he might see some blowback down the line.

Hand said LMVH acquisition targets “are going to want future assurances…those might include things like broken deal fees where they get not only reimbursed for all legal and banking fees, but an actual punitive payment.”

“I don’t think the reputational damage supports it being a good decision to have done it so publicly,” he said.

And Be Ready to Bury the Hatchet

It wasn’t wholly surprising that LVMH and Tiffany avoided the actual trial and came back together, albeit at a lower price.

The strategic rationale — LVMH’s desire to expand in hard luxury and the big American foothold that Tiffany offered — was all still there.

So even in the heat of battle, it’s probably best to not go completely scorched earth.

“There’s a real, meaningful opportunity ahead,” said David Bassuk, global retail practice leader of AlixPartners. “These are two great powerhouses of luxury and on both sides, the consumer really has an appreciation for the brands. Some of these tough battles, you put that behind you and there’s a real win-win here. People recognize that there’s a big element there that, this is business and some of these are strategies for getting the deal done, and are able to put that behind them, shake hands and move forward. The long-term play here is these teams will put things behind them. It’s going to take some real leadership to tackle that.”

That now is a task for the company’s new executive team.

With the deal came a new C-suite that includes Louis Vuitton executive Anthony Ledru as chief executive officer; Arnault’s second-eldest son, Alexandre Arnault, as executive vice president, product and communications, and Louis Vuitton chief Michael Burke as chairman.

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