【Paris, Franc】Why Did the World’s Largest Luxury Group ‘LVMH’ Acquire ‘Tiffany’?

At the end of last year, the topic in the global luxury industry was ‘LVMH Moët Hennessy Louis Vuitton’. This world’s largest luxury group, which owns over 70 well-known brands including Louis Vuitton, Fendi, Givenchy, and Bulgari, drew attention due to its merger and acquisition (M&A) agreement in November last year with the iconic American jewelry company Tiffany & Co. (hereinafter Tiffany). LVMH demonstrated strong determination for global business expansion by agreeing to acquire Tiffany for a total of $16.2 billion ($135 per share, approximately 19.512 trillion won). In terms of acquisition amount alone, this was the group’s largest M&A deal in history. In a joint statement, both sides announced, “The acquisition of Tiffany will strengthen LVMH’s position in the global jewelry market and significantly enhance its presence in the United States.” The formal contract is expected to be finalized within this year.
In fact, the first meeting between LVMH and Tiffany was not smooth. In October last year, LVMH proposed an acquisition at $120 per share, but Tiffany rejected the negotiation, citing the price as too low. Industry insiders unanimously agree that “LVMH did not walk away from the negotiation table because of its determination to expand into the jewelry sector.” According to consulting firm Bain & Company, the global jewelry market grew by 7% in 2018, higher than the average growth rate of the luxury market (5%). The prevailing view in the industry is that LVMH aimed to strengthen its presence in the high-potential jewelry sector and expand in the US market. This acquisition is also expected to trigger a reshuffle in the luxury industry, including the jewelry sector.
Until now, the company leading the global jewelry and watch market was Switzerland’s Richemont Group, which owns Cartier. Pauline Brown, former North America head of LVMH, stated in a recent media interview:

LVMH, which has everything in luxury from A to Z—fashion, beauty, retail—had only one shortcoming: jewelry. Around 2018, Richemont Group’s jewelry and watch sales reached approximately 10 billion euros. With this Tiffany acquisition, LVMH’s sales in this sector will reach about $9.6 billion. Naturally, this places LVMH among the global top two, forming a competitive landscape.

In fact, until the early 1980s, the global luxury industry mostly consisted of family-owned companies independently operating a single brand. The shift to a massive group owning dozens of brands under the leadership of professional companies was driven by Bernard Arnault, Chairman of LVMH, because he was a genius at mergers and acquisitions.
To understand LVMH’s business expansion, one must examine the group’s growth process. The LVMH Group is a colossal conglomerate owning dozens of top-tier brands including Louis Vuitton, Fendi, Celine, Marc Jacobs, Berluti, Bulgari, Chaumet, Hublot, Zenith, Christian Dior, and Moët & Chandon. When Chairman Bernard Arnault visited Korea in 2010 for duty-free business discussions, the reason Lee Boo-jin, then managing director of Hotel Shilla, personally went to Incheon International Airport was due to LVMH’s stature in the luxury market. According to Bloomberg’s Billionaires Index, last year Chairman Arnault’s wealth, with a net worth of $103 billion (approximately 120.201 trillion won), ranked third after Microsoft founder Bill Gates and Amazon CEO Jeff Bezos. This demonstrates the immense power and financial strength he holds in the global economy.
Founded in 1987 when Chairman Arnault acquired Louis Vuitton, the LVMH Group has charted a growth curve through aggressive M&A. In the fashion and leather goods sector, it acquired Givenchy in 1988, Kenzo in 1993, Loewe and Celine in 1996, Marc Jacobs in 1997, Emilio Pucci in 2000, and Fendi and Donna Karan in 2001. In the wines and spirits sector, after acquiring Hennessy Cognac, it purchased vineyards in Brazil, Australia, and California’s Napa Valley, focusing on luxury wine production, and acquired brands like Moët & Chandon, Dom Pérignon, and Krug. His love for wine is also evident in family marriages; his eldest daughter, Delphine Arnault, married Alessandro Gancia, CEO of the Italian wine dynasty ‘Gancia’, in 2005.
The LVMH Group’s sales surpassed 25 billion euros in the first half of last year alone, a 15% increase compared to the same period the previous year. The fashion and leather goods sector, which drives the group’s overall sales, grew by 20%. The core brand Louis Vuitton led from the front, while Christian Dior pushed from behind.
LVMH Group’s success strategy can be summarized in three points. First, aggressive M&A. LVMH’s M&A activities, which began with the acquisition of the struggling Christian Dior in 1984, have continued to this day, increasing the number of brands to over 70. Chairman Arnault judged that acquiring brands with history and tradition was far more synergistic than creating them anew. Second, full-fledged support for designers was implemented. For instance, when former Christian Dior head designer John Galliano’s fashion show received harsh criticism, Chairman Arnault did not hold back praise and support, saying:

This led to the brand’s success. Third, they created and spread dreams and fantasies about luxury. They continuously marketed the illusion of brands and products that consumers someday must own, targeting the upper class and top-tier brands. The Louis Vuitton Cup yacht race and marketing with famous sports stars are part of this strategy.

Interest in Korea, one of Asia’s leading luxury markets, remains strong. Every year, Chairman Arnault personally visits Korea to inspect the group’s flagship brand stores and monitor the market. Last November, to celebrate the reopening of the Louis Vuitton flagship store ‘Louis Vuitton Maison Seoul’, he visited Korea and toured the Lotte and Shinsegae duty-free shops located in Myeongdong.
Chairman Arnault’s focus on Korea is due to the domestic luxury market, which continues to grow despite economic downturns. A department store industry insider stated:

In October last year, Sephora, the world’s largest cosmetics retailer and a member of the LVMH Group, also entered the Korean market. It is targeting consumers with its own brands, previously only available through overseas direct purchase, and luxury cosmetics found on the first floors of department stores. Since entering Korea, Sephora has been opening new stores at a rate of one per month, accelerating its efforts to capture the Korean market.

Meanwhile, the New York Times (NYT) recently reported that Louis Vuitton purchased a 1,785-carat diamond rough. Named ‘Sewelo’, meaning ‘rare discovery’ in the Botswana language, this diamond was mined from the Karowe mine in Botswana, Africa. The NYT assessed: