Advances in Economics, Business and Management Research, volume 166

Proceedings of the 6th International Conference on Financial Innovation and

Economic Development (ICFIED 2021)

Analysis on the Acquisition of LVMH on Tiffany& Co.

Jiani Li*
Haidian International High school, Haidian District 100195, Beijing, China
*Corresponding author. Email: [email protected]

ABSTRACT
A famous acquisition case happened on Nov. 25. 2019, within the luxury industry — LVMH’s acquisition of
Tiffany&Co. This paper analyzed the acquisition and focused on LVMH as the purchaser and Tiffany as an acquiree.
By using the day of the acquisition as the tipping point, this research will focus on comparing qualitative and
quantitative aspects of changes as reasons to support the main argument. Preliminary estimates, the acquisition overall
brings benefit to the LVMH whether on its sales revenue or its organizational structure. After all the LVMH is a huge
company that has businesses worldwide with numbers of sales streams, this small acquisition won’t bring much effect
on the whole company’s original structure and operation. However, for TIF itself, the acquisition did not provide a
decent amount of advantages. Instead, the companies fame and popularity, even sales amount got diminished as it
predicted to be in the future.

Keywords: Tiffany&Co., LVMH, acquisition, Stakeholder analysis, SWOT analysis

1. INTRODUCTION The background or details of the two companies and

the acquisition are essential for the whole analysis since
The acquisition is a form of a growth strategy that it needs to make a comparison between the time before
used to develop and promote the whole company to and after the acquisition.
gain more profit and sales revenue. Acquisition usually
happened to be connected with the operation and future LVMH: “LVMH Moët Hennessy Louis Vuitton SE,
growth of the two or more companies. Each of their the world’s leading luxury products group. Numbers of
interest gets to fulfill or hurt by the acquisition under a a famous luxury brand that belongs to LVMH.
variety of perspectives. This paper aims to give an announced that stockholders of Tiffany & Co. (NYSE:
overall evaluation about the advantages and TIF) (“Tiffany”) have voted overwhelmingly to approve
disadvantages of the acquisition will also be included. the previously announced merger agreement relating to
By going through some important qualitative aspects of the proposed acquisition of Tiffany by LVMH at a
this acquisition, analysis and argument will be special meeting of Tiffany stockholders [1]. Tiffany &
conducted or stated. Despite this specific case of Co. is an American luxury jewelry and specialty retailer
acquisition, there are numerous types of mergers and headquartered in New York City. It sells jewelry,
acquisition cases that happened or about to happen. This sterling silver, china, crystal, stationery, fragrances,
research uses the Acquisition of Tiffany as an example water bottles, watches, personal accessories, and leather
to elucidate important points or views that companies or goods. Tiffany is known for its luxury goods,
businesses need to pay attention to when making such particularly its diamond and sterling silver jewelry.
decisions. Even though the overall analysis is stated as above,
According to the agreement announced on there are still benefits for TIF and disadvantages for
November 25, 2019, LVMH will acquire Tiffany, the LVMH to keep it balance. This analysis provides
global luxury jeweler, for $135 per share in cash, in a significantly broad aspects of the acquisition through
transaction with an equity value of approximately €14.7 different views.
billion or $16.2 billion.” On Nov. 25, 2019, LVMH About LVMH and Tiffany, stakeholder analysis,
acquired Tiffany & Co. with $16.2 billion. LVMH swot analysis and other measurement tools will be used
purchased the TIF for $120 per share. It offers support as methods to evaluate the qualitative aspect of the
to TIF but TIF also faces many changes and challenges acquisition. Also, important business/company concepts
[1]. such as Change and Strategy will be discussed and

Copyright © 2021 The Authors. Published by Atlantis Press B.V.

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interpreted as support information for the final difference is that the workers now need to follow New
argument of the analysis. Therefore, the research rules, aims and new objectives. Even with big potential
question clearly stated as “To what extent the organizational culture conflict between the new
acquisition of Tiffany affect the qualitative aspect of managers and old employees. However, there are
both companies?”. benefits for the workers: more attractive remuneration,
new motivation methods and new punishment and
1.1. Stakeholder Analysis penalization.

Stakeholder analysis (LVMH&TIF): Stakeholder Managers: Managers in TIF now have to follow
analysis is an important tool used to evaluate a directions from LVMH as the new leader. Essentially
business’ qualitative behavior or influence caused by they got less decision-making power. They need to
important business decisions. follow new strategies made by LVMH such as
expanding the market in Europe and continue to boost
Shareholders: According to articles and news, sales in Asia. LVMH made this decision basically
LVMH’s shareholders won’t face any share dilution because the new leaders or shareholders revealed the
after the acquisition because the number of shares didn't incredibly strong purchasing power among Chinese
get reduced. Instead, the per-share value that each consumers.
shareholder in LVMH can get has an amount increase
due to the additional purchase from TIF, basically is 1.2. SWOT Analysis
that the number of shares doesn’t increase but the
earnings add from TIF to LVMH. However, TIF’s A SWOT analysis outlines what the entrepreneur
shareholders do not own the shares anymore after will do if things do not go as planned. Usually, a
acquired by LVMH. company will make a SWOT analysis of themselves to
assess the current and future situation of a product,
Customers: The origin customers of TIF will face a
brand, business, proposal or decision. (Paul Hoang)
potential increase in the price of Tiffany’s products.
SWOT analysis also includes the considerations of both
Based on LVMH’s organizational culture, every new
internal and external factors that are under the current
brand that they acquired and take in control need to go
changes or issues. The following SWOT analysis is
through the process of raise in its average price. This
based on the point views of LVMH as a business group
phenomenon happened with RIMOWA who increase
and on TIF’s point of view [3].
their price according to the command from LVMH. On
the other hand, the customer base of LVMH that used to •Strength: internal factors that are full of
buy brand products will face an increasing trend. Also competitiveness compare to the competitor.
the number of purchases and number of potential
•Stronger brand awareness - Since TIF is acquired
customers. By comparing the price of TIF’s luxury or
by LVMH, the original customers now potentially
jewelry with other luxury products under LVMH, TIF’s
added to the customer base of LVMH and to the group
products are much cheaper.
of brands under it. An increase in customer base could
Investors: LVMH’s investors will increase the essentially increase brand awareness and popularity.
interest in continue investing LVMH and the flooded
•Complete control over the production process -
brands. Mainly due to the bright prospect of the whole
After the acquisition, LVMH is able to get full control
product group within the additional benefit brought by
of TIF with its own methods of operation. This helps
the acquisition of TIF. However, according to David
LVMH’s whole company’s operation.
and Tom Gardner, who are famous investor leaders, the
estimation shows that the investment in LVMH is not in •Weakness: internal factors that are a lack of
the TOP 10 worth invest list. [2] This estimation might competitiveness compared to the competitor.
change the original investor’s thoughts or prevent new
•Loss of previous/old clients - After changes in
potential investors.
leaders and shareholders level, the old business partners
Competitors: After the acquisition of TIF by and the client might get changed which creates potential
LVMH, rising competitiveness goes against the conflicts. The loss of partnership with the old client
competitor of LVMH, Van Cleef & Arpels, which they may also lead to the loss of potential followers/buyers
now need to face a competitive power from a new who were attracted by the client.
luxury jewelry brand under LVMH. With cheaper
•The trend of decreasing profit for TIF - The news
prices that can attract more consumers with average
articles and announcements from the company itself
purchase power.
states that Tiffany & Co. has recently facing a decrease
Employees: Although the shareholders of TIF does in the value of stocks. Overall resulted in a decrease in
not work in TIF anymore, the employees still belongs to its sales revenue.
the company and continues with daily operations. The

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Figure 1 Profit and loss account of Tiffany & Co. [8]

•Opportunity: the external possibility for future categorize the current decision making leads the
development. company to which category of company expansion.
Ansoff matrix shows whether the company belongs to
•Market development - LVMH has a strong market
Market penetration, product development, market
share and power in the jewelry industry. As a result of
development or diversification according to the change
the acquisition, TIF reaps the benefit of high power and
in products and markets.
influence. Also the potential of the increasing market
share of its own.
•Threats: external factors that hinder the prospects
for an organization.
•Adverse changes in fashion and taste - After TIF
has been acquired by LVMH, the concept of design Figure 2 Demonstration of Ansoff matrix
might get to change with the different views from new The current decision made by LVMH which is the
shareholders, or the new designer hired. The change of acquisition of TIF is classified in the category of Market
fashion or position of taste impacted the consumers’ development. Before the acquisition, LVMH does not
intention on purchasing the product from TIF. Also, own any brand under the luxury jewelry industry or
Outside the company, the overall change of preference even expand into the jewelry market. Hence, since TIF
in the fashion market could also impact the future sales is already a matured company inside the luxury jewelry
revenue of the company. market with its own concept of design and vision
•Conflict interest between the main customers from statement, with the relatively stable consumer base, the
the two companies - There are customers in TIF who do acquisition helped LVMH to expand into a new market
not like or agree with the company concept of LVMH. with comparatively low product development - high
On the other hand, there are LVMH fans who dislike possibility that LVMH will get into the product design
Tiffany’s design notion and ideas. This negatively section of TIF in future development.
impacts the both company’s potential sales volume and The point of Market development is that LVMH is
the company’s reputation. now selling existing products in the new market for
•Loss of potential investors for TIF - The investors LVMH. and this change in strategy is considered as a
and analysts say that the value of investing in TIF is not medium risk growth strategy. Basically, LVMH is
going to be high in the future, instead, it might decrease getting new customers for the existing products.
so that the company failed to attract the investment that However, different from other company’s market
could help with their development and growth. development, LVMH can not enjoy the potential benefit
of a strong familiarity with its product that can make the
1.3. Ansoff Matrix Analysis development easier and safer to achieve because it’s an
acquisition by LVMH with basically no experience of
The Ansoff matrix (1957) is an analytic tool that design or sells any pieces of jewelry.
helps managers to choose and devise various product
Bernard Arnault, Chairman and Chief Executive
and market growth strategies. (Paul Hoang)
Officer of LVMH, commented: “This approval is a
The acquisition is known as a type of change in the significant milestone as we move closer to completing
business structure that also helps with the expansion our acquisition of Tiffany, an iconic company with a
and development of the company. In this specific rich heritage and unique positioning in the global luxury
acquisition, the Ansoff matrix helps to demonstrate and jewelry market. A globally recognized symbol of love,

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Tiffany will be an outstanding addition to our unique welcoming Tiffany into the LVMH family and helping
portfolio of luxury brands. We look forward to the brand reach new heights as an LVMH Maison.”

Figure 3 Finance statement of Tiffany & Co. [8]

2. CONCLUSION her help on the content of knowledge about business.

Meanwhile, I appreciated the assistance of the teachers
According to the analysis above, from the TIF’s with my writing section of this paper. They all provide
perspective, the internal stakeholders are mainly gaining valuable guidance with the production of the paper.
benefit from the increase of popularity and stronger
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ACKNOWLEDGMENT [4] Tiffany & Co. Stockholders approve Acquisition by

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First and foremost, I would like to express my documents/press-releases/tiffany-co-stockholders-
heartfelt thanks to my business management teacher for approve-acquisition-by-lvmh/

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