How Bernard Jean Arnault Achieved Success

  • lauren DeAlmeida
  • August 11, 2021
  • 0
Bernard Arnault

Image Courtesy of Stats Gate/CEOWORLD

Bernard Jean Étienne Arnault is an art collector, French investor, and businessman. Actually, Sir Bernard Jean is the chairman and chief executive of LVMH Moët Hennessy – Louis Vuitton SE. According to Forbes 2021 report, Bernard Jean Étienne Arnault is one of the wealthiest men in the world.

Louis Vuitton is one of the world’s largest luxury goods companies. Today, he is a centibillionaire.

The early life of Bernard Jean Arnault

Bernard Arnault was born on the 5th of March 1949 in Roubaix, France. Marie-Josèphe Savinel, his mother was a massive fan of Dior. On the other hand, his father, Jean Léon Arnault, owned a civil engineering company Ferret-Savinel.

Arnault’s education and early career

Bernard Arnault studied at the Lycée Maxence Van Der Meersch in Roubaix. He graduated from Ecole Polytechnique in 1971. Ecole Polytechnique is France’s leading engineering school. Later on, Bernard began to work for his father’s company. He worked there for three years. Soon after, Bernard convinced his father to shift the focus of the company to real estate. Therefore, his father sold the industrial construction division and renamed it Ferinel. Later they built a textile company. They relocated the place as the headquarters and renamed the real estate branch to the George V Group.

In addition to that, Bernard Arnault was the president of Ferret-Savinel from 1978 to 1984. Later on Bernard Arnault came to know that the French government was set to choose someone to take over the Boussac Saint-Frères empire, a textile and retail conglomerate that owned Christian Dior.

He approached Antoine Bernheim, a senior partner of Lazard Frères for help. Afterward, Bernard Arnault acquired the Financière Agache, a luxury goods company. Soon, Arnault became the Chief Executive Officer of Financière Agache. Bernard won the bidding war for Boussac Saint-Frères. He bought the group for a ceremonial one franc. Moreover so, he effectively took control of Boussac Saint-Frères.  Along with Christian Dior, Boussac’s assets included the department store Le Bon Marché, the retail shop Conforama, and the diapers manufacturer Peaudouce.

In addition to that, Bernard Arnault bought Boussac. Within 2 years, he laid off 9,000 workers. Due to that, he acquired the nickname “The Terminator”. Bernard sold nearly all of the company’s assets. He kept only the Christian Dior brand and Le Bon Marché department store. As a result of the jobs cuts and reforms, Arnault was able to nurse Financière Agache back to health. By 1987, the company was profitable again and booked earnings of $112 million on a revenue stream of $1.9 billion dollars.

The rise of Louis Vuitton

Bernard Arnault provided USD 1.5 billion to form a holding company with Guinness in July 1988. Guinness held 24% of LVMH’s shares. Arnault spent $600 million to buy 13.5% more of LVMH, making him LVMH’s largest shareholder. LVMH had been created on the premise that the conglomerate would be too large for a single hostile raider. But, the premise failed to take into account internal takeover attempts. The fault became too large to ignore when Arnault had a differing strategic vision from Henry Racamier, Louis Vuitton’s president.

Later, in January 1989, he spent another $500 million to gain control of a total of 43.5% of LVMH’s shares and 35% of its voting rights, thus reaching the “blocking minority” that he needed to stop the dismantlement of the LVMH group.

On  the 13th of January 1989, Bernard Arnault was unanimously elected chairman of the executive management board.

The expansion and growth

Bernard Arnault led the company through an ambitious development plan after gaining the power of leadership. Through that, he transformed LVMH into one of the largest luxury groups in the world. Alongside LVMH was the French-based Kering and Swiss luxury giant Richemont.

Within eleven years the annual sales and profit rose by a factor of 5. The market value of LVMH increased by a factor of 15. After these successes, Bernard Arnault acquired Celine in July 1988. During the same year, he sponsored French fashion designer Christian Lacroix in order to advertise the company’s luxury clothing line.

In the 1990s, Arnault decided to develop a center in New York to manage LVMH’s presence in the United States. He chose Christian de Portzamparc to supervise this project.

LVMH acquired Berluti and Kenzo in 1993.  During the same year, Bernard Arnault bought out the French economic newspaper La Tribune. As a matter of fact, the company never achieved the desired success, despite its 150 million euro investment. Furthermore, he sold it in November 2007 in order to buy a different French economic newspaper, Les Échos, for 240 million euros.

Guerlain was acquired by LVMH in 1994. Loewe was bought by Bernard Arnault in 1996. Later on,  he bought Sephora and Marc Jacobs. Along with that five more brands were also integrated into the group: Thomas Pink in 1999, Emilio Pucci in 2000, and Fendi, DKNY, and La Samaritaine in 2001.

In 1999. the LVMH Tower was opened. That same year, Arnault turned his eyes on Gucci, an Italian leather goods company, which was run by Tom Ford and Domenico De Sole. He discreetly amassed a 5 percent stake in the company before being detected. Gucci responded hostilely, and called it a “creeping takeover.”

After the notice, Bernard Arnault decided to increase his stake to 34.4 percent while insisting he wanted to be a supportive and unassertive stakeholder. De Sole proposed that in return for board representation, Arnault would stop increasing his stake in Gucci. However, Arnault refused to accept these terms. De Sole discovered a loophole that allowed him to issue shares with only board approval, and for every share LVMH bought, he created more for his employees, diluting Arnault’s stake. The fight dragged on until settlement in September 2001. After the legal ruling, LVMH sold its shares and walked away with $700 million in profit

LVMH in the 2000s

Bernard Arnault announced the acquisition of 50.4% of family-owned shares of the Italian jeweler Bulgari on the 7th of March, 2011. He intended to make a tender offer for the rest, which was publicly owned. The transaction was worth $5.2 billion. In 2011, Arnault invested $640 million in establishing LCapitalAsia. Later, on 7 March 2013, National Business Daily reported that mid-priced clothing brand QDA would open stores with the assistance of Arnault’s private equity firm LCapitalAsia and Chinese apparel company Xin Hee Co., Ltd. in Beijing.

Moreover so, in February 2014, Bernard Arnault decided to get into a joint venture with the Italian fashion brand Marco De Vincenzo. Bernard took a minority 45% stake in the firm. In addition to that, in April 2017, Arnault announced the acquisition of Christian Dior haute couture, leather, both men and women’s ready-to-wear, and footwear lines, which integrated the entire Christian Dior brand within LVMH.

Bernard Arnault led LVMH to record sales of 42.6 billion by January 2018. In April 2018, he became the richest person in fashion, defeating Zara’s Amancio Ortega. During the same year, the net profit had increased 29%. In November 2019, Arnault planned to acquire Tiffany & Co. for approximately US $16.2 billion. The deal was expected to close by June 2020.

The toll COVID-19 took on LVMH

In September 2020, LVMH issued a statement indicating that the takeover would not proceed and that the deal was “invalid” because of Tiffany’s handling of the business during the COVID-19 pandemic. During the COVID-19 pandemic, Arnault saw his wealth shrink by 30 billion dollars as sales of luxury goods plummeted.

Tiffany’s lawsuit against LVMH

Because of that Tiffany filed suit against LVMH. They asked asking the court to compel the purchase or to assess damages against the defendant; LVMH planned to counter sue, alleging that mismanagement had invalidated the purchase agreement. In mid-September 2020, a reliable source told Forbes (magazine) that the reason for Arnault’s decision to cancel the Tiffany purchase was purely financial: Tiffany was paying millions in dividends to shareholders despite a financial loss of US$32 million during the pandemic. Upon examination of financial records, Arnault discovered that some US$70 million had already been paid out by Tiffany, with an additional US$70 million scheduled to be paid in November 2020.

LVMH’s counterclaim

As a result, LVMH filed a counterclaim against the court action commenced by Tiffany; a statement issued by LMVH blamed Tiffany’s mismanagement during the pandemic and claimed that it was ‘burning cash and reporting losses'”.

In late October 2020, Tiffany and LVMH agreed to the original takeover plan, though at a slightly reduced price of nearly $16 billion, a minor reduction of 2.6% from the aforementioned deal. The new deal reduced the amount paid per share by LVMH from the original price of $135 to $131.50. LVMH completed the purchase of Tiffany in January 2021.

Under Arnault’s leadership, LVMH has grown to become the largest company by market capitalization in the Eurozone, with a record of 313 billion euros ($382 billion) as of May 2021.

Arnault has promoted decisions towards decentralizing the group’s brands as a business strategy. As a result of these measures, brands under the LVMH umbrella such as Tiffany are still viewed as independent firms with their own history.

Arnault – the world’s richest man

For a very brief period on May 24, 2021, Arnault temporarily became the richest man in the world, surpassing Jeff Bezos with a net worth of 187.3 billion dollars. However, a few hours later, Amazon’s stock ticked up and Jeff Bezos reclaimed the spot.

Read more on: Bill Gate’s Billionaire Journey

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