Question

will the merger and acquisition between LVHM and Tiffany be successful? why?

on the basis of LVHM acquire TIFFANY Case !

Answer 1

a) Overview of the deal of the acquisition by LVHM.

Louis Vuitton moet hennessy(LVMH) announced the acquisition of the luxury jewellery,Tiffany & co.(Tiffany).The deal was finalized on 25th November for USD 16.2 billion(£14.7 billions,USD 135 per share)Which is higher than the initial offer given to Tiffany in October.

b) Company profile of LVMH AND TIFFANY: LVMH is a French luxury group that owns diverse portfolio of 79 luxury brands in different genres.over the years,the company has expanded interms of product line and region through acquisition to become one of the largest global luxury conglomerates. Interms of products fashion and leather goods accounts for 39% of company revenue,wines & spirits segment contribute 29% of revenue,while watches and jewellery segment contributed a meagre 8.7% revenue to LVMH in 2018.

With the acquisition of tiffany,LVMH is getting an access to the legendary American luxury brand that is as old as 1837.we go by the figures of 2018, this acquisition would result in an 8% increase in the revenue and 6.7% increase in the operating profit of LVMH. The contribution of the Watches and Jewellery segment of LVMH to the total revenue would increase from 8.7% to 16% and contribution to operating profit would increase from 7% to 13%.

  One of the reasons Tiffany agreed to this deal could have been its slightly shrinking margins in the recent years as depicted above. The brand value of Tiffany has also gone down slightly in the recent years. It is believed that the company could not adapt completely to the changing tastes of the millennials. There have also been many changes at the executive level in Tiffany in the last 3 years. The company did not have a stable pool of employees in the senior management and executive level for the last few years leading to speculations over its stability. LVMH has a good record of driving the growth of brands even in jewellery and watches segment. LVMH had acquired the jewellery brand Bulgari in 2011 and the revenue from this brand is now twice that in 2011. With the help of this acquisition LVMH will be able to expand its reach both in the jewellery segment and in the United States.

c)The acquisition between LVMH AND TIFFANY was successful

Both the companies have been operating in luxury segment and catering to high end customers. We believe there are synergies between the two companies for successful integration and smooth operations post-merger. Tiffany can get access to the supplier relationships of LVMH, its distribution network and its other strategic relationships and partnerships to strengthen its supply chain and operations through this acquisition. Tiffany will also get a more stable management after the merger. We expect this merger to be successful and the revenue and profit of the jewellery and watches segment of LVMH to increase after this merger.