He Bought Louis Vuitton and turned LVMH into an Empire

[Music] is one of the richest men alive forbes has named him as one of the world's 100 greatest living minds in considering that he oversees a portfolio of over 70 brands and nearly 3 900 retail stores that doesn't seem to be an understatement the ceo of lvmh i know works long days and nights and the sheer number of luxury brands that are owned by the louis vuitton umbrella is hard to grasp as you can guess amassing so many companies doesn't happen without ruffling some feathers while arno was once a recluse who got his start in engineering and construction he eventually made his fortune through brutal takeovers in a bid to collect as many luxury consumer brands as possible but as he shuns the spotlight you may have never heard of him bernard arno's path is full of business strategy lessons and today we'll dive into the unique perspectives that helped him create the greatest collection of brands in the world are you ready to learn how this french mogul made his massive fortune then let's dive in arnaud was born in roubaix france on march 5th 1949. his first love was music but he didn't have the talent to make it as a concert pianist so after graduating from a prestigious engineering school he joined his father in working for the family's civil engineering business faire savagel at first arno simply worked on the construction site but even at his young age he was already brimming with grand business ideas he eventually convinced his father to sell the engineering company and focus on real estate and hospitality instead his father was impressed they changed the company name to farinelle and the next year arnaud became the ceo but while arno ran the business quite successfully his interests were broader than just real estate he was intrigued by luxury brands especially dior it was a fascination that it started with his mother who had always loved dior perfumes and this is where we see arnold's first awareness of the power of a brand the story goes that he once visited the u.s and hopped in a taxi upon hearing our nose accent his driver revealed his love for french culture and politics arnaud then asked the driver if he knew the name of the french president the response rocked our nose world i do not know the name of your president but i do know the name christian dior said the driver that moment changed arnold's life forever he obsessed over dior and the worldwide brand recognition the company had created at the time dior was a hidden asset inside a failing textile and retail conglomerate call busac saint freires rusack had filed for bankruptcy and the french government was about to choose someone to take over the empire arnaud was still a young real estate developer but when he heard that the french government was looking for a buyer he was all ears while the ailing textile mill was in a dire position it owned a number of important companies including dior and arnaud was of course very interested in buying up dior's parent company he took the plunge and pounced on the offer in a quest to get his hands on the famed french fashion house the then 35 year old arno took 15 million from his family and combined it with 45 million from the french financial institution lazard ferreira this single purchase catapulted him from family businessman to luxury brand kingpin and it solidified his place amongst france's highest status operators but arno was only getting started when arno took over busac it owned several companies christian dior the department store lebo marche the retail shop conferrama and the diapers manufacturer produce but arno was only interested in two of them so we sold nearly all of the company's assets keeping only the prestigious christian dior brand and le bon marche department store by that time dior and libo marche were already well-established names lebeau marche had been around for over a century and dior was a popular brand among the hip elite arno knew that brands with a sense of history can have a big impact in the field of technology being new and unique can serve as your branding power but in most other industries history equals value longevity is a source of affirmation and perpetual survival is a form of social proof this is why our no went for respected brands that were already around for several decades he saw their brand and he used his impressive foothold in the luxury business to begin building what would become the world's largest luxury conglomerate one of the strategies he employed was to zero in on having the company focused solely on its luxury goods once his operation was deemed successful arnaud was ready for the next big step his lvmh takeover today most know arnaud is the leader and head operator of lvmh but what many don't know is how he got that role the new york times called to take over a corporate duel to the death and it certainly wasn't a gentle fight arnold's real play at the time was actually dior's perfume division which had been sold to merge the fashion house and spirit company louis vuitton hennessy or lvmh it was a flaw that arno did not like and he wanted dior's perfume license back but how lvmh was doing well and it didn't seem like arnaud would be able to get a foothold but then a fight between the company's brand heads gave him an unexpected opening it all started in 1987 at the time wet hennessy was led by elaine chevalier chevalier was an experienced manager and he ran a successful business but while his company was prosperous it was also exposed to a hostile takeover for several months chevalier noticed a peculiarity in his company's stock price someone was buying a lot of shares which caused the stock to rise mysteriously he feared a takeover bid was behind the silent accumulation and he desperately needed a stable shareholder base louis vuitton on the other hand was headed by the 76 year old henry rakamye rakamye was the husband of odile vuitton who was in turn the great granddaughter of louis vuitton the brand's founder recommended had taken over management in 1977 and by focusing heavily on expanding internationally the company had reached nearly a billion dollars in sales by 1987. so when louis vuitton and wet hennessy merged into lvmh it seemed like only good things could come out of it the merger was supposed to provide diversification to rick kamiye while offering protection from hostile takeovers to chevalier but unfortunately the two leaders quickly classed and within weeks the business love affair turned sour despite the merger raccomier continued to manage louis vuitton as if he was his sole owner he had stationery printed on which his name appeared above chevaliers and he also publicly complained to the media and even went on to denigrate the spirit's business by saying champagne can be found on the shelves of every corner supermarket but our leather goods require exclusive distribution to make matters worse the aging rakamye also felt threatened when chevalier wanted to bring on the former head of chanel as rekhamye's future's successor that's when i saw what hennessy wasn't living up to our agreement recommier complained they saw the merger as an absorption we saw it as a marriage of equals for us maintaining autonomy was very important despite their hostile feud cevallier had other things to worry about his company's stock price was rising again which meant someone was still buying a large position continuously worried about takeovers he began working with lazard ferres the same financial institution that helped darneau acquire the failed textile mill busock saint freires some years earlier cervallier wanted lazard to issue convertible bonds which were supposed to be sold to foreign investors but instead lazard kept the bonds among a small group of domestic banks chevalier had to act quickly again he needed another white knight while raccomier had the voyton family behind him chevalier was just a salaried manager looking to bolster his support he approached his old friend sir anthony tenet of guinness guinness and lvmh already jointly distributed wines and spirits and chevalier suggested a friendly investment as he had initially been talking of a mere 3.5 percent stake raccamie agreed at first but when chevalier realized that such a small amount wouldn't provide adequate protection against a hostile takeover he upped the stake to 20 percent rakamye saw this as a declaration of war this was a demonstration that wine and spirits wanted to take the leading role over baggage and accessories he said seeing these actions from his corporate enemy raccomie realized he needed his own ally and so he phoned a friend bernard arno rekhamye saw a younger version of himself in the young arno and he didn't regard him as a rival but rather a potential protege he suggested that arno bid for 25 percent of lvmh's stock together with the voytal family holdings this would give them a voting majority the two men had an identical vision and the plan was that raccamie would be the leader and aren't no his successor now it was arno and raquemie versus chevalier and guinness but the tables were about to turn when chevalier was on vacation in the french alps raqqamye called him to inform him of the impending bid chevalier asked for a delay of a few days to reflect which rakamya granted when arnaud heard the news he was furious and he called antoine bernheim a senior partner of lazard frerese berenheim warned him and told him to be careful raccamie wants to use you against chevalier he said if you go along with him he will have you in turn besides chevalier's ally guinness had vastly larger financial resources so instead bernheim arranged for a meeting between arnaud and chevrier with promises of a greater share in lvmh chevalier persuaded arnaud to join their side darnow quickly and secretly switched teams as you can probably guess this infuriated rakamye quite a bit but by the time you heard of it it was already too late arno had acquired 16 of lmh's shares in the open market and secured another 8 through convertible bonds which had been held by his bankers but arno wasn't done yet in just three days he aggressively amassed another six hundred million dollars worth of shares pushing his holdings to thirty seven point five percent this made him the largest shareholder in the battle not recommend not chevalier and guinness are no and to the surprise of everyone he even ended with enough votes to make his father chairman of the supervisory board chevrolet could only watch as the young entrepreneur was gaining more and more control and when guinness tried to acquire more shares independently arnaud informed them that they could only do so through their joint company which was under arno's control a bitter power struggle developed between raccamie and arnaud which the press dubbed it the young wolf versus the old lion the warfare continued for months on end and when others finally resigned arnaud was made chairman by unanimous vote when it was all said and done he left the arena as the victor after conquering lvmh arno felt on top of the world and his success encouraged him to begin one of the largest buying sprees in business history over the past four decades he has spent billions to acquire leading european companies his interests seem to lie in fashion fragrance jewelry watches and fine wines and spirits and he's only after the best of the best think of luxury brands such as givenchy and fendi donna corrine and marc jacobs arno's acquisition strategy boils down to the following hard-nosed dealing and extreme aggressiveness and going after top brands you could call him the warren buffett of the luxury brand world he buys high quality companies with the aim of holding them forever and just like buffett he is not afraid of closing operations firing hundreds of workers and reaping gigantic personal profits arno has what you call a long-term outlook he cares little about short-term profits and his motivation is not so much about financial results but rather about brand legacy brand growth and brand loyalty in an interview with forbes he once said the following money is just a consequence i always say to my team don't worry too much about profitability if you do your job well the profitability will come when we discuss a brand i always tell them my real concern is how admired and successful a brand will be in five or ten years not the profitability in the next six months or how much we're going to make next year this is critically important arno knows that it's all about doing what drives long-term value for the customers and the company he doesn't mind losing a bit of money in the short run to reap long-term competitive advantages to him brand quality and durability are everything and he judges his business by the staying power of its brands not whether it exceeds quarterly earnings forecasts in a way i should not say that because you may think i'm pretentious he once said but lvmh is a french monument it represents france all over the world people know the names louis vuitton christian dior don perrion cheval blanc better than anything else with this quote he wanted to make clear that these brands have gained more fame than any french president or actress ever will achieving such a high level of worldwide brand recognition that lasts for several decades is only possible with a loyal customer base this is also why bringing high quality products and services to the market is a must you want to make sure that once a customer purchases your product for the first time they will want to come back for more it's not selling the first bottle of moet or hennessy that supports a company's sustainability or gives it generations of successful returns no it is selling the second third fourth and even fifth one repeat customers are key and this can only be achieved by providing real value this was the story of bernard arno the french business titan has left a gigantic imprint on the fashion industry not with his stylish ideas or innovative trends but rather on account of the sheer scale of his acquisitions and their continuing profitability arno has been on a global buying spree to top quality brands since 1984 and lvmh has grown tremendously since he became ceo in 1989. today it is the number one top luxury company in the world just recently it acquired the biggest jewelry store tiffany and company for 15.8 billion dollars and it doesn't seem as if arno is planning on stopping the expansion of his portfolio anytime soon which brand do you think is next share it in the comments and also let us know which one of these three tips you found the most interesting i hope you enjoyed this video and see you in the next one and don't forget to check out our channel for more inspiring business videos

Channel: Business Stories

Views: 154,097

Keywords: lvmh, bernard arnault, lvmh documentary, bernard arnault story, how bernard arnault built lvmh, bernard arnault lvmh, lvmh story, lvmh success story, how lvmh started, moet hennessy louis vuitton, bernard arnault interview, louis vuitton, Business Stories, lvmh company

Id: Fz9GyboQXK0

Length: 16min 47sec (1007 seconds)

Published: Thu Nov 11 2021