Opinion / Is LVMH’s Tiffany & Co. purchase still going ahead? Luxury group behind Louis Vuitton, Dior and Fendi broke off the engagement – but was it all a negotiating tactic for a better price?

Sep 15 , 2020

US jeweller Tiffany & Co.’s talks about a buyout from luxury conglomerate LMVH have turned acrimonious. Photo: Reuters

The Paris-based luxury conglomerate appeared to get cold feet, accusing the long-troubled, iconic New York jewellery brand of mismanagement during the pandemic – they replied by suing to force the merger through – but was it all part of CEO Bernard Arnault’s plan to score a luxury brand at a discount price all along?

Turning Tiffany & Co. around and setting it on a sustained and significant growth trajectory would be one of the biggest success stories in the luxury industry. The prospect of transforming the seemingly ever-underperforming, yet iconic American jeweller into a growth driver was what lured Paris-based LVMH, parent company of brands like Louis Vuitton, Dior, Rimowa and Fendi into a – potentially short-lived – love affair with New York-based brand. It seemed to be a match made in heaven, but recent events may lead to a break-up.

Window of the Tiffany & Co. store on Rodeo Drive in Beverly Hills, Los Angeles. Photo: Bloomberg

According to The Wall Street Journal, LVMH has accused Tiffany of mismanagement during the Covid-19 crisis, citing disappointing results that are “significantly inferior to those of comparable brands of the LVMH Group during this period”.

Additionally, the French group, controlled by billionaire Bernard Arnault, alleges that a letter from the French foreign minister obliges them to delay any commitment in order to have leverage in a potential trade war between France and the USA.

As a response, on September 9, Tiffany & Co. announced a lawsuit against LVMH to enforce the planned merger. The Financial Times indicated in an article on September 11, titled “Grandmaster Bernard Arnault looks to the Tiffany endgame”, that the moves may have been nothing more than an aggressive tactic to lower the price from that negotiated before the pandemic. The article states that Arnault used tactics from chess to secure the US$16.6 billion acquisition, including “decoys, deflections, pins and interference”.

Bernard Arnault, billionaire and chief executive officer of LVMH in January 2020. Photo: Bloomberg

The next months will prove whether these tactics will play out in favour of LVMH, or if trying to buy a luxury at a discount could become costly for the world’s leading luxury conglomerate. While the outcome of the very public battle is unclear, a potential marriage that starts with a public fight in court is not the most romantic and promising way to start a successful long-term relationship. It suggests that even if LVMH does proceed with the takeover, a smooth integration may be at risk.

La Samaritaine luxury department store, operated by LVMH, on Paris’ Avenue Montaigne. Photographer: Bloomberg

Over the last decade, Tiffany has made a series of changes at the top, including the stepping-down of former CEO Frederic Cumenal in early 2017, leading to the appointment of Alessandro Bogliolo that autumn. Bogliolo was confronted with the critical need to focus on more affordable collections while not alienating brand image and top-end customers who expect exclusivity, personal attention and privacy.