LVMH takes a 17% Stake in Hermes

Bernard Arnault

On October 25th WWD announced that LVMH acquired a 17% stake of Hermes. Hermes, founded in 1837 is the french fashion house which is the epitome of luxury and elegance. Receiving anything in an orange box, regardless of the size, is exclusive and absolutely divine.  Three days later on the October 28th WWD announces that LVMH could possibly be interested in buying more stakes in Hermes but LVMH has said it is not interested in seeking out representation on the board of Hermes nor is LVMH interested in taking over the brand at this time.  Hermes says they will battle if a takeover attempt were to be made.

So why would Hermes be so quick to say they would fight a takeover?  History plays a significant role.

In reality many of our favorite brands, designers and luxury houses are owned or partly owned by other major organizations. However, the significance in this case is the history of LVMH, the brain child of Bernard Arnault, the 7th wealthiest man in the world at an estimated net wort of $27.5 billion USD. If we look at the history of events and circumstances that led to the establishment of LVMH we will find that looking into the past may give us some insight into future intentions.

What is the history of the establishment of LVMH, the largest luxury conglomerate in the world and why could this be a sign of what is to come?

Let's start at the beginning, Bernard Arnault had a vision which employed his savvy business sense to acquire luxury brands and to acquire the best. At 37 years old, in 1984, Arnault began this endeavor by acquiring Agache Willot, a company who went bankrupt who had the valuable asset of Christian Dior and he also financed the once-hyped Christian Lacroix and aimed to build him up from square one. When it came to creating LVMH, Arnault had done his research and exploited the conflict between Moet Hennesy's CEO and the president of Louis Vuitton in order to merge the two. Arnault above all is a smart and shrewd businessman who capitalized on buying up brands he believed in who were in financial trouble, companies who experienced conflicts and he took advantage of companies whose stock prices decreased in market crashes. This was the beginning of years aggressively pursuing, almost like a predator, brands that he coveted as he began creating his conglomerate through hostile takeovers and buyouts.

Despite the polemic approaches Arnault used to create his masterpiece, he is also responsible for revitalizing, saving, bringing many brands to the levels of success they are today as well as giving opportunity to American designers and young, emerging and modern talent the like of Michael Kors, Alexander McQueen and Marc Jacobs.

Given this history one must wonder what the plans LVMH and Arnault may have for Hermes.