"The Wolf in Cashmere" Bernard Arnault's Wild History

2023-06-05
Summary:

When it comes to luxury brands, many people will name Dior, LV, and Givenchy, but few people know that they all belong to the same group - LVMH Group, and Arnault is the founder of LVMH Group, known as the "Godfather of World Luxury".

Speaking of Bernard Arnault, his life is full of legendary colors. Arnault was born in France in 1949 and is currently 71 years old. He is known as the "godfather of luxury goods in the world" and the founder of LVMH Group.

As a luxury goods holding company, LVMH (Mo ë t Hennessy Louis Vuitton)Chairman and CEO of SA, Bernard Arnault, controls about 50% of the large conglomerate, which owns over 70 top luxury brands worldwide, including Christian Dior and LouisVuitton, Dom Perignon, Mo ë t et Chandon, Hennessy, Sephora, and TAG Heuer.

He has a refined appearance and has been repeatedly praised by fashion magazines for titles such as "Best Dressed Man". He is naturally calm and even somewhat reserved, always keeping a low profile in front of the media. But no one has ever doubted that Arnault is a profound and outstanding entrepreneur. He often smiles, which forms a huge contrast with his aggressive acquisition business behavior. Some people describe him as "a wolf in a Cashmere shirt".

Arnault is skilled in acquiring and often obtains the maximum benefits at the lowest cost when competing with other companies. He is doing business targeting the wealthy, luxury jewelry brands, and in fact, it is LVMH Group's several exciting acquisitions that have achieved his current position as the richest person.

In this issue, EBC takes you closer to the legendary life of Bernard Arnault, the wolf in Cashmere shirt, one of the world's top ten richest men.

Bernard Arnault

Starting from an extraordinary business family

1. Ambitious, planting the seeds of fashion

Arnault was born in the industrial city Rube in northern France in 1949, which is far from the luxurious environment he is now in. His father is a famous manufacturer who owns a civil engineering and real estate company, Ferret Savinel. Arnault's mother was "very obsessed with Dior" and trained her son to receive classical training on the piano.

In 1971, at the age of 25, Arnault obtained his undergraduate degree from the most selective engineering school in France, É cole Polytechnic, and joined his father's industry as the Chief Architecture Officer.

In the same year, a conversation with a New York taxi driver planted the seeds of fashion in his heart, and the company Dior became a fetter in his heart. Arnault asked the driver if he knew about French President George Pompidou. "I don't know," the driver replied, "but I know Christian Dior." The New York taxi driver teased Arnault and said, "You are French. I don't know who your president is, but I know Dior is a famous brand in France."

Arnold has a particular fondness for Dior, reportedly due to his shopping experience in the United States. According to French fashion and luxury goods management experts and author Mary Francie Boccina of "Biography of Dior", one night in the United States, Arnault needed a bath towel and went to a nearby department store to buy it. The store also sold Dior's products, and he felt that Dior's products were clearly more elegant than other products. Later, whenever there was a chance, he would buy Dior's products.

Arnold took over as CEO from his father in 1977 and became chairman in 1978, giving him complete control of the family business at the age of 29.

In 1981, when the French Socialist Party came to power, Arnault moved his family to the United States, where he spent three years developing Ferret Savinnel's real estate business. But his ambition is far from limited to the field of architecture. What he wants is a company that can expand its scale, a company with French roots and international influence.


2. Accurate vision, the founder of the early generation created Jiangshan

Time quickly arrived at the magical year 1984.

When he learned that Christian Dior's parent company was going to be sold, Arnault was ready to take the initiative. Dior's parent company was a textile and diaper company called Vilot, which had already gone bankrupt at the time and the French government was looking for a buyer. However, the meaning of the drunken man is not in alcohol, and Arnault is not actually interested in Violet, but in the Dior Fashion Company under the group.

However, Bernard Arnault, 36 years old at that time, did not have so much capital to purchase. Finally, he resolutely pledged his family business and took out $15 million of family funds from his own pocket. With the rest of the funds provided by investment partner Lazard, he raised $80 million, and finally acquired Dior Group, which is twice the size of the family business.

Dior designer John Galliano and Arnault

Designers John Galliano and Arnault

It is reported that he promised to revitalize the company and retain jobs, but actually laid off 9000 employees. Since then, he has a nickname - "wolf in Cashmere shirt". Because of his resolute and emotionless style in commercial acquisitions, there is a huge difference between him and the elegant French.


Arnault the Conqueror

1. Merge LV, Luxury Aircraft Carrier Show True Appearance

At the same time, Arnault came up with the idea of Hennessy and Louis Vuitton. At that time, LV and MH merged to form LVMH Group in order to reduce the risk of malicious acquisition. The birth of LVMH has almost laid the foundation for the 1.0 stage of the global luxury goods business landscape, and the size of the three brands, Mo Yue, Hennessy, and LV alone, is enough to dominate the discourse power of the entire luxury goods industry.

On the other side, Arnault was not idle either. After taking control of Dior's fashion department, he embarked on radical reforms. On the one hand, by gathering funds through the connections provided by Shevallier, one can enhance their influence in the luxury goods industry; On the one hand, humbly learning from the head of LV's son-in-law, Henry Lacamier, and implementing vertical management have elevated Dior's product manufacturing and quality control to luxury standards.

He is good at gathering the strengths of various brands, learning from Shevallier, directly controlling the marketing department, collaborating with numerous famous stars to create various marketing events, and using various methods to poach designers from other brands. Under his meticulous management, Dior has gone from a small brand with a "crane tail" to soar, greatly increasing sales and market share. This has also made Arnault a niche in the luxury goods industry.


2. Lead the wolf into the house, bury the mountains and rivers

The newly established LVMH Group may seem huge, but it is very fragile. For the purpose of equity distribution, the senior executives of Louis Vuitton and Hennessy are not giving way to each other, and the internal competition is very serious.

What is even more difficult to reconcile is that Shevallier, who MH took over halfway, has no "family sentiment" and firmly believes in the professional manager system; However, after several generations of inheritance, LV believes in the family management system. There are numerous contradictions between the two sides, ranging from product planning and brand layout to the design of a single piece of writing paper, which are difficult to achieve consistency. The differences gradually widen.

The head of MH, La Camille, invited Arnault, who became famous for Dior, to join the struggle camp to assist him in increasing his share of the company's revenue and indirectly controlling the situation.

Here comes Arnold's chance!

Lacamier did not expect that his move was not to add wings like a tiger, but to lure wolves into the house.

Early LVMH executives and Arnault

Early LVMH executives and Arnault

In 1987, the power struggle between the two sides escalated, and Arnault, who had long coveted LVMH, officially began covert actions. On the one hand, he promised to help Lacamier provide funding to help defend his position in LVMH; Turning his head and playing the role of "good brother" in front of LV manager Shevallier, Shevallier mistakenly thought that he had entered LVMH, which could effectively balance the relationship between the two parties.

So Shevallier made the most regretful decision of his life: secretly transferring 24% of his company's convertible bonds to Arnault at an extremely low price, helping him become the controlling shareholder.

Here comes the real climax! In October 1987, the Wall Street stock market crash broke out and the French stock market crashed. Affected by the stock disaster, LVMH Group's stock price plummeted by over 70%. Arnold used all his resources to copy the bottom, coupled with the covert transmission of benefits to various levels of management and shareholders in the competition, which made him ascend to the throne of LVMH Group Chairman in one fell swoop!

Shevalier just woke up from a dream! He didn't expect his brotherly confidant to sweep him out of the door... His last card was also taken away by his opponent, and Shevallier was no longer powerless. At this time, he was no longer Arnault's opponent in his old age.


3. Profound Reform of LVMH

After taking over LVMH, Arnault's first task was to 'clean up'. The reason why LVMH's senior management had a fierce internal struggle back then was because there were supporters within each faction. After Arnault took office, he didn't care about it. After a major change of blood, he not only kicked Shevallier out of the game, but also completely defeated LaCamille.

Arnault's superhuman courage and business talent are also demonstrated through this. For example, at that time, LV had gradually started to decline, and Arnault's one move brought LV back to life: telling history.

Mr. Louis Vuitton, the founder of LV, founded his own brand of the same name at the age of 33, specializing in luggage. Due to its superior quality, VuittonThe gentleman's suitcase has been appreciated by Empress Eugenie and has become a product that the upper class is eager to purchase. Arnault's transformation of LV is precisely the excavation of this history, laying the foundation for LV's "noble" and "inheritable fashion" tone.

LVMH’s profound reforms

In the face of LVMH's current commercial empire, "occupying the nest of magpies" is only the first step. Arnault, like a prehistoric crocodile with a wide open mouth, aimed at every prey on this dining table.


Eating these brands one bite at a time

1. First Strike - Givenchy

After stabilizing the interior of LVMH, Arnault led this revitalized commercial behemoth to embark on a bloody external hunt.

In the first battle, he extended his claws to the luxury goods industry's famous product - Givenchy.

In 1953, Givenchy became popular in Paris and designed clothing for numerous Hollywood film stars. For example, Givenchy had always personally designed clothing for Hepburn, and the "Little Black Dress", which had been popular for decades, became his most classic masterpiece. Givenchy's commercial value also reached its peak. In addition, Jacqueline Kennedy is also one of Givenchy's fans. In 1963, the Kennedy family appeared at the funeral of her husband John F. Kennedy wearing a black Givenchy suit.

Givenchy

Jacqueline wearing Givenchy at John F. Kennedy's funeral

But in the late 1960s, Givenchy's high-end customization seemed too conservative, leading to a decline in performance. In 1988, Givenchy's liquidity was in danger. Although Givenchy himself tried various methods to save the company, the results were minimal, and Givenchy inevitably fell into a financial crisis.

At this point, LVMH Group seized the opportunity and reaped the first well-known brand in the luxury jewelry industry for $45 million.

After the equity merger, Arnault followed suit and made adjustments and changes to its management. Arnault fully controls Givenchy, making it a sub brand of LVMH.


2. Sing high and make great progress - buy, buy, buy

Arnault summarized a hunting routine with a unique personal style.

Take advantage of economic downturn or family changes, and when brands are in trouble, take advantage of the opportunity to make bottom buying; After obtaining it, the original management team was mercilessly cleaned, making it truly a playing card in their own hands.

After taking over Louis Vuitton Moet Hennessy, Arnault invested billions of dollars to acquire Kenzo, Guerlain, Loewe, Celine, and more.

LVMH has a big appetite and is quick to move. As long as Arnold is interested, he will "buy and buy". Statistics show that in 1999 alone, LVMH swallowed 15 world-renowned brands. Not only in the "soft luxury" field, but also in the "hard luxury" fields such as Aston Martin and Uber watches, Arnault also wants to take a share. I have to say 'money is capricious'.

It has its own leading enterprises in the fields of fashion, perfume, jewelry and watches, high-end wine and spirits. At this point, the scale of LVMH's "luxury empire" has gradually matured.

In 2011, the company invested nearly 5 billion dollars to acquire Italian jeweler Bulgari, and the transaction was mainly carried out in stock. Two years later, it acquired fine wool supplier Nuo You Pianya for a reported price of 2.6 billion US dollars. LVMH Group also spent $3.2 billion to acquire the London based hotel group Belmont. Belmont's luxury hotels include Cipriani Hotel in Venice, Orient Express, a luxury train line, and three ultra luxury safari hotels in Botswana.


Difficult to Bite Hard Bones - Gucci and Hermes

1. The tug of war between Gucci's "acquisition anti acquisition" strategy

Of course, having money is not really something you can do as you please. In the field of luxury goods, there are many who have suffered losses for Arnault. Among them, the most well-known and classic ones are Gucci and Hermes.

Gucci and Herm è s are both family businesses, with scattered stocks in the hands of family members. The decentralization of power gave Arnold the opportunity to take advantage of the situation.

In the 1990s, the world ushered in a wave of luxury brand transformation. Gucci, who was already struggling in the market, also stood out and returned to the public eye due to the change of CEO and creative director. The increasingly strong Gucci has become a thorn in Arnault's side, and in order to combat its growth, Arnault began hunting.

At the beginning, in order to avoid regulation, LVMH quietly acquired 4.99% of Gucci's shares in the secondary market. The familiar formula came back, and at the same time, it extended an olive branch to various shareholders of Gucci to take over their stocks. This operation caused LVMH's share price of Gucci to soar to 34.4% in just one month, at which time Gucci felt panic.

Gucci's management subsequently launched a counterattack and launched the anti malicious acquisition mechanism - the Poison Pill Plan. Simply put, when Gucci faces a malicious takeover crisis, its management and employees will purchase new shares from the company's zero interest loans and use the dividends from these new shares to repay the loan. Gucci created the opportunity to issue a large number of new shares in the form of "everyone to help", in order to dilute LVMH's stock, which did not disappoint expectations, and Arnold's stock fell to 20%.

In order to quickly get out of this "takeover anti takeover" tug of war, Gucci launched the "White Knight" plan, causing malicious bidding from third parties and selling 39 million new shares to Kaiyun Group, further diluting Arnault's stock. As a result, Arnault had no choice but to give up Gucci.


2. Herm è s, also struggling

Around 2010, in order to avoid regulation, LVMH secretly purchased 17.1% of Herm è s shares in the stock market through covert operations such as equity swap contracts. With 4.92% of Herm è s shares purchased in the secondary market, Arnault held a total of 22.02% of Herm è s shares. At this moment, members of the Herm è s family realized and were completely bewildered: there were over 200 members of the Herm è s family, and no one had more stocks than Arnold!

In order to prevent Herm è s from standing by like this, the family members decided to unite and fight back. On a day in December 2010, approximately 50 members of the Herm è s main family held a secret meeting in Paris, with an extremely high level of confidentiality and not even allowed to bring their phones.

As a result of the meeting, members of the Herm è s family decided to give up their personal interests and lock in 50.2% of the company's shares through a strict equity custody method, forming the H51 Holding Company. It was also stipulated that these shares would not be allowed to be sold for the next 20 years. The remaining 12.5% of the shares were also stipulated to have a preemptive right in the Hermes family's custody fund, which shattered Arnault's ambition to acquire Hermes.

However, Arnault is not completely unprofitable. During the period of holding stocks, LVMH Group has already made a profit of 3.8 billion euros, which is not considered a disastrous defeat.


A Wolf with a Sharp Marketing Sense

Of course, while "buying and selling", LVMH also has to "sell and sell" - search for a market. Of course, China cannot ignore this. Arnault has also repeatedly shown goodwill to China.

For example, at the second Import and Export Expo in 2020, LVMH had already signed a memorandum of cooperation with the Chinese government. Alno, who has always been low-key, even personally made a statement: the second China International Import and Export Fair will definitely achieve significant results, and LVMH should "pay tribute to Chinese consumers

LVMH

LV exhibition area of the 2nd China International Import Expo

Arnold's reckless acquisition behavior is seen as "arbitrary" by the industry, and he seems to be equally casual when selling his brand. He personally founded the high-end fashion brand Christian decades agoThe sale of Lacroix to the American Falic Group surprised the entire fashion industry.

Arnold's ranking cannot be separated from the boost of Chinese consumers.

As of June 29th Beijing time, the Forbes Real Time Rich List shows that Bernard Arnault, 73 years old, the chairman of the global luxury goods giant LVMH Group, has a new wealth of $172.5 billion, ranking third in the world.

LVHM's financial report shows that, boosted by strong growth in China, Asia, excluding Japan, became LVMH's largest source of revenue in 2021, with sales up 34.6% compared to the same period in 2020, accounting for 35% of total sales; In the first quarter of 2022, sales figures in the Asian region (excluding Japan) increased again, with a year-on-year increase of 8%, contributing 37% of the group's sales, far higher than the second place US region's contribution of 24%.

Colliers' 2022 Luxury Outlook Report shows that China will continue to be the leader in global luxury goods growth this year and is expected to become the world's largest luxury goods market by 2025.

As long as LV handbag sales continue to grow, perhaps in the near future, Arnault will be able to laugh at Bezos again.

Those noble luxury brands in Bernard's hands seem like dice to play with. During the economic downturn, he once slowed down the pace of acquisitions. Now, the potential of the fashion industry is slowly recovering, and the entire luxury goods world is paying attention to when Bernard will start a new round of acquisitions.

Someone commented on Arnold this way: "Bernard Arnold was a conqueror, not a creator

Bernard Arnold

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