Life,  Wealth

How Bernard Arnault’s Family Business LVMH Faces the Challenge of Succession

On May 24, LVMH’s stock plummeted 5% in Paris, its largest decline in over a year. Bernard Arnault, the world’s wealthiest man and owner of LVMH, saw his fortune shrink by $11.2 billion in a single day. Nevertheless, the French tycoon still boasts a net worth of $191.6 billion (roughly 3,000 billion yuan), which also remained above 400 billion US dollars (approximately 3,000 billion yuan).

While the poor struggle to create wealth, the rich face the challenge of preserving and passing on their wealth, especially Bernard Arnault.

01

A dilemma?

As the leader of LVMH, the world’s biggest luxury goods conglomerate, the 74-year-old Bernard has yet to name his successor, leaving room for endless speculation from outsiders.

Although the old man is still in good shape, he has legally extended his tenure to 80 years old not long ago, but behind his reluctance to retire is undoubtedly his intentional evasion and entanglement on the issue of succession. After all, each of his children has their own talents and merits, and it seems fair to choose any one of them, but it also seems unfair.

Unlike many Chinese entrepreneurs who have only one child in their families, Bernard’s two marriages gave him five offspring, namely, his eldest daughter Delphine (48 years old) and his eldest son Antoine (46 years old) from his former wife. ), and his third son Alexander (31 years old), his fourth son Frederick (28 years old) and his fifth son Jean (25 years old) from his current wife.

According to the inheritance tradition that has been formed by human society for thousands of years, it seems inevitable that the eldest son Antoine will take over LVMH.

Although this eldest son was once disliked by his father who was a top student because of his poor academic performance as a child, according to God’s principle of “closing a door and opening a window”, Antova, who possesses strong social skills, is also a well-known “social butterfly” in the family. For instance, former Soviet leader Mikhail Gorbachev, boxing champion Ali, and a host of Hollywood stars represented by Angelina Jolie have all become partners with LVMH under Antoine’s operation to endorse the latter.

In addition to making great contributions to expanding the group’s influence, Antoine’s blissful marriage with Russian supermodel “Guo Na” also added a lot of charm to the family image.

One is the gentle, handsome, loving and wealthy LV prince, and the other is an international supermodel who was born in a slum but transformed herself into a swan through hard work. The love story between the two is very much like the prince and Cinderella in a fairy tale. And this marriage, which is highly envied by the outside world, will undoubtedly infuse more romance and warmth into the wolf-like Arnault family.

In recognition of Antoine’s achievements, Bernard has gradually delegated more and more group affairs to his son over the years.

Whether it is overseeing the operation of men’s luxury brand Berluti and Italian luxury brand Loro Piana, or managing LVMH’s public relations and group image work, or recently joining the LVMH board of directors and becoming the CEO of Christian Dior SE (which holds 41% of the shares of LVMH Group) under Nader’s guidance, the 46-year-old Antoine is clearly favored by his father.

This is also reflected in some unexpected public events, where Bernard’s dependence on his son is further deepening.

For example, in recent months, as the French authorities insist on implementing the reform of the pension system, the French people whose interests have been severely harmed have taken to the streets to protest. Because of his close friendship with the current French President Macron and being the richest man in France, Bernard was once issued a “wanted warrant” by the furious French people. The LVMH headquarters in Paris was also briefly occupied by demonstrators last month. “If the government needs to find a source of pension funds, it might as well take it from the pockets of billionaires, starting with Arnault.”

Although the matter did not escalate into a violent conflict in the end, Bernard still consulted Antoine with lingering fears, and launched a public opinion war with his son’s suggestion: publicize LVMH’s tax and employment contributions to the country to the outside world, and promise to communicate with the public in a more open and transparent manner.

The contingency plan given by Antoine is undoubtedly the best solution that the Arnault family can offer at this time. Although the outcome is still uncertain, Antoine has proved that he has the intelligence and ability to “take over the command” in this chaotic situation.

However, it is too early to conclude that Antoine will inherit LVMH from his father. As a famous artificial intelligence said, “It is indeed a luxury to keep human beings rational forever.” And the outside world cannot judge how much Bernard’s greater affection for his daughter Delphine will affect LVMH’s succession candidate.

The eldest princess Delphine is the crown prince Antoine’s biggest rival in this “succession war”.

As the eldest of the second generation of the Arnaud family, Delphine inherited her father’s focused and stern side of personality.

The good news is that this strong-willed personality has served Delphine well throughout her more than 20-year career at LVMH.

In addition to firing the “Pirate Lord” who made anti-Semitic remarks by means of thunder, which greatly reduced the negative impact of LVMH’s main brand Dior on the outside world, Delphine’s emphasis on talent has always been praised by the outside world. For example, the LVMH Prize, an authoritative competition in the fashion industry led by her, not only discovered and nurtured a large number of talents for the industry and the group, but also further consolidated LVMH’s authoritative position in the industry, and prompted Dior to enter a golden period of development.

The bad news is that Delphine’s influence in the outside world is significantly weaker than that of her brother Antoine because she is too engrossed in specific business and does not like to socialize. An insider once commented on the siblings, “She behaves like a quiet nun, while her brother Antoine behaves like a prince of pleasure.”

In appreciation of Antoine’s accomplishments, Bernard has progressively entrusted more and more group affairs to his son over the years.

Whether it is supervising the operation of men’s luxury brand Berluti and Italian luxury brand Loro Piana, or handling LVMH’s public relations and group image work, or recently joining the LVMH board of directors and becoming the CEO of Christian Dior SE (which holds 41% of the shares of LVMH Group) under Nader’s mentorship, the 46-year-old Antoine is evidently preferred by his father.

This is also manifested in some unforeseen public events, where Bernard’s reliance on his son is further intensifying.

For example, in recent months, as the French authorities persist on implementing the reform of the pension system, the French people whose interests have been severely compromised have taken to the streets to protest. Because of his close friendship with the current French President Macron and being the richest man in France, Bernard was once issued a “wanted warrant” by the enraged French people. The LVMH headquarters in Paris was also briefly occupied by demonstrators last month. “If the government needs to find a source of pension funds, it might as well take it from the pockets of billionaires, starting with Arnault.”

Although the matter did not escalate into a violent conflict in the end, Bernard still consulted Antoine with lingering fears, and initiated a public opinion war with his son’s suggestion: publicize LVMH’s tax and employment contributions to the country to the outside world, and promise to communicate with the public in a more open and transparent manner.

The contingency plan given by Antoine is undoubtedly the best solution that the Arnault family can offer at this time. Although the outcome is still uncertain, Antoine has proved that he has the intelligence and ability to “take over the command” in this chaotic situation.

However, it is too early to conclude that Antoine will inherit LVMH from his father. As a famous artificial intelligence said, “It is indeed a luxury to keep human beings rational forever.” And the outside world cannot judge how much Bernard’s greater affection for his daughter Delphine will affect LVMH’s succession candidate.

The eldest princess Delphine is the crown prince Antoine’s biggest rival in this “succession war”.

As the eldest of the second generation of the Arnaud family, Delphine inherited her father’s focused and stern side of personality.

The good news is that this strong-willed personality has served Delphine well throughout her more than 20-year career at LVMH.

In addition to firing the “Pirate Lord” who made anti-Semitic remarks by means of thunder, which greatly reduced the negative impact of LVMH’s main brand Dior on the outside world, Delphine’s emphasis on talent has always been praised by the outside world. For example, the LVMH Prize, an authoritative competition in the fashion industry led by her, not only discovered and nurtured a large number of talents for the industry and the group, but also further consolidated LVMH’s authoritative position in the industry, and prompted Dior to enter a golden period of development.

The bad news is that Delphine’s influence in the outside world is significantly weaker than that of her brother Antoine because she is too engrossed in specific business and does not like to socialize. An insider once commented on the siblings, “She behaves like a quiet nun, while her brother Antoine behaves like a prince of pleasure.”

With the support of his father, Alexander has truly achieved some accomplishments in his work. For example, RIMOWA, under Alexander’s management, once accounted for more than 40% of LVMH’s sales. And the LVMH digital transformation work that Bernard has attached great importance to in recent years, the main person in charge is also Alexander, “I am still building my own identity. I see myself as a builder, someone who likes to build things.”

Although he is very busy at work, as the only “social butterfly” in the family, Alexander will actively expand his “circle of friends” like his elder brother Antoine on weekdays. Whether it is former US President Trump, stock guru Buffett, Amazon founder Bezos, Apple’s current CEO Cook, etc., they are all frequent visitors on Alexander’s social platform. Trump even praised Alexander for “bringing Tiffany into a new era of incredible success and growth.”

However, it is similar to his elder sister who “loves and respects gentlemen but not sympathy for villains”. According to Alexander’s colleagues, Alexander seemed to deliberately keep a distance from them when he was in the company. He rarely greeted or chatted with them, and hardly participated in gatherings among colleagues, which was far from the sunny and cheerful personality he created on social platforms. Far.

Because of this inconsistency, Alexander’s reputation within the company has always been poor, and he is still not liked by most of his colleagues.

In contrast, although Alexander’s eldest sister Delphine doesn’t like to socialize, she won’t deliberately create a persona on social platforms, and she has gained a lot of fans by virtue of her excellent business ability.

In addition to the poor internal reputation, Alexander’s marketing measures for Tiffany’s rejuvenation over the years have also attracted dissatisfaction from many senior people in the industry. Ana Angelich, the former CBO of the American fashion brand Banana Republic, once publicly criticized Alexander, “Why did Tiffany abandon the original brand style and become another streetwear brand? I can’t understand it. ”

The differences and conflicts in concepts between the old generation and the new generation have led to the former generally believing that Alexander is too young to take over the heavy responsibility of LVMH from Bernard. And Alexander, who lost the older generation of votes, was still favored by his father, but the strong traditional forces forced him to unite younger forces, namely his two younger brothers: Frederick and Jean.

An interesting phenomenon is: if you look at Alexander’s social platforms, apart from his beloved wife and various industry leaders, Alexander shows the most photos with his two younger brothers. As for his elder brother or elder sister, they are often not in this ranks.

For Alexander, his younger and less experienced brothers Frederick and Jean are undoubtedly his most powerful allies in the future confrontation with his elder brother and elder sister. And being younger and having less experience also means less ambition, and he will occupy a dominant position in the three-person alliance formed with his younger brothers.

Compared with his brother Alexander, Frederick, 28, has inherited his father’s blunt side. For example, Bernard, who loves tennis, often takes his children to watch tennis matches, and intends to convey to the outside world the message of the harmony of the Arnault family. But compared to the noncommittal of his brothers and sisters, only Frederick will frankly express to the outside world that his family is also ordinary people, and they will also have disputes on the court.

For this son who resembles him the most, Bernard gave him the same care as other brothers and sisters. Especially when he learned that Frederick was admitted to his alma mater, the old man was so happy that he directly sponsored all the expenses of the alma mater’s annual ball, and praised his son’s talent and accomplishments in music during the period.

After Frederick graduated successfully, Bernard, who became more gentle on the issue of educating his children, also gave him a lot of freedom. “Of course my father will give me advice, but he also gave me a lot of freedom.” It was only after Frederick made a name for himself in the society that he entered the LVMH Group on his father’s suggestion and was in charge of the relatively marginal watch business – TAG Heuer.

However, Frederick also admitted that he was willing to take over the family watch business. Apart from the fact that my father gave me a TAG Heuer watch when I was a child, which made me have a strong interest in the watch industry. A more realistic consideration is to avoid the edge of my elder sister and brothers.

Perhaps it is this frankness that attracts the less experienced and more innocent younger brother Jean. And this 25-year-old youngest with the highest education in the family, influenced by his brother Frederick, also showed great enthusiasm for watches.

In order to respond to the expectations of his youngest son, Bernard will arrange for him to work in the watch department of LVMH. Although I am engaged in the most marginal business and have not made any achievements so far, it is also a blessing to be able to engage in the industry I love and objectively stay away from the right and wrong caused by inheritance issues.

The “marginalization” arrangement for Frederick and Jean can be regarded as Bernard’s “protective” measures for these two potential heirs at this stage.

As the saying goes, “Every man is innocent, but his wife is guilty.” The bloodlines of Frederick and Jean determined that it was impossible for the two of them to stay completely out of this “war of successors”. But at the moment when age and qualifications cannot support their ambitions, “showing weakness” is also the best countermeasure Bernard can think of for them.

It’s just that considering the youngest Alexander’s characterization of Bernard as he likes, his desire to seize the heir apparent is already evident. In addition, after the old man extended his tenure to 80 years old, the biggest benefit is undoubtedly the elder brother and elder sister who are not as good as him but better than the young Alexander. It is not difficult to imagine the future open and secret struggles of the Arnault family around the selection of heirs.

This can’t help but make people sigh, if Bernard, who “has fought all his life”, can learn to “enjoy and enjoy” like Xuande Gong, and establish his own “prince prince” candidate as soon as possible, how can there be such a complicated situation today.

It’s no wonder that the old man loves power and refuses to step down.

Some organizations have made statistics: Globally, the average life span of a family business is only 24 years. 30% is the success rate of a family business that can be successfully passed on from the founder to the second generation. The success rate that can be passed on to the third generation will further drop to 13%. In the end, only 5% of family businesses can be passed on to the fourth generation or later.

Take Bernard himself, for example.

As the only child in the family, Bernard has been placed high hopes by his grandparents since birth. This is not all because of the second-generation relatives. On the one hand, his father was in the door backwards and had always been at the bottom of the food chain at home; After De’s father got married, he “established his own family” together and lived a two-person world.

It can be said that Bernard was raised by his grandparents, and the two old people have already appointed their grandson as the successor of their own business. According to Bernard’s recollection, when he was 7 years old, he often visited his company building with his grandfather.

As an adult, Bernard showed extraordinary business talent after entering his own business. With his argument with his father and the long-term lobbying of other company executives, the company successfully embraced the thighs of the Rothschild family and brought huge profits to the family through business reorganization.

However, “a tree that is beautiful in the forest, the wind will destroy it”, even if this outstanding person is his own son.

People familiar with the matter have revealed vaguely that in order to firmly control the power of the company in his own hands, Bernard’s father often secretly stumbled his son who is getting more and more prestigious. In this regard, Bernard can only play tricks, and once had a very unpleasant fight with his father.

Fortunately, Bernard’s grandmother is still alive. By handing over all his shares to his grandson, Bernard became the largest shareholder of the company, and finally reached a settlement with his father by virtue of his superior strength, taking the leading right of the company from the latter. And this family business founded by Bernard’s grandfather also avoided the melee between the second and third generations, and laid the initial foundation for Bernard’s future business journey.

In addition, this unbearable past also made Bernard realize that the chaos caused by internal fighting would be fatal to any (family) business.

Following this line of thinking, how can you have the last laugh in the fierce business competition? Under the premise of ensuring that his own business does not go into trouble, taking advantage of the chaos of the opponent’s company to strike a fatal blow, and even creating chaos in the opponent’s company if necessary, became the only way for Bernard to expand his business empire in the future. .

Some analysts once pointed out that “every time there is an economic crisis, LVMH’s market share will always increase to varying degrees”, and “the timing of Bernard’s mergers and acquisitions is often concentrated in the economic depression cycle… At this time, the target company will often have a significant discount, so The transaction cost is much lower, and the bargaining chips picked up cheaply can also obtain huge returns in the future when the economy picks up.”

It’s no wonder that the old man loves power and refuses to step down.

Some organizations have made statistics: Globally, the average life span of a family business is only 24 years. 30% is the success rate of a family business that can be successfully passed on from the founder to the second generation. The success rate that can be passed on to the third generation will further drop to 13%. In the end, only 5% of family businesses can be passed on to the fourth generation or later.

Take Bernard himself, for example.

As the only child in the family, Bernard has been placed high hopes by his grandparents since birth. This is not all because of the second-generation relatives. On the one hand, his father was in the door backwards and had always been at the bottom of the food chain at home; After De’s father got married, he “established his own family” together and lived a two-person world.

It can be said that Bernard was raised by his grandparents, and the two old people have already appointed their grandson as the successor of their own business. According to Bernard’s recollection, when he was 7 years old, he often visited his company building with his grandfather.

As an adult, Bernard showed extraordinary business talent after entering his own business. With his argument with his father and the long-term lobbying of other company executives, the company successfully embraced the thighs of the Rothschild family and brought huge profits to the family through business reorganization.

However, “a tree that is beautiful in the forest, the wind will destroy it”, even if this outstanding person is his own son.

People familiar with the matter have revealed vaguely that in order to firmly control the power of the company in his own hands, Bernard’s father often secretly stumbled his son who is getting more and more prestigious. In this regard, Bernard can only play tricks, and once had a very unpleasant fight with his father.

Fortunately, Bernard’s grandmother is still alive. By handing over all his shares to his grandson, Bernard became the largest shareholder of the company, and finally reached a settlement with his father by virtue of his superior strength, taking the leading right of the company from the latter. And this family business founded by Bernard’s grandfather also avoided the melee between the second and third generations, and laid the initial foundation for Bernard’s future business journey.

In addition, this unbearable past also made Bernard realize that the chaos caused by internal fighting would be fatal to any (family) business.

Following this line of thinking, how can you have the last laugh in the fierce business competition? Under the premise of ensuring that his own business does not go into trouble, taking advantage of the chaos of the opponent’s company to strike a fatal blow, and even creating chaos in the opponent’s company if necessary, became
the only way for Bernard to expand his business empire in the future. .

Some analysts once pointed out that “every time there is an economic crisis, LVMH’s market share will always increase to varying degrees”, and “the timing of Bernard’s mergers and acquisitions is often concentrated in the economic depression cycle… At this time, The target company will often have a significant discount, so The transaction cost is much lower, and the bargaining chips picked up cheaply can also obtain huge returns in
the future when the economy picks up.”

Look at Hermès again.
As another global luxury brand as famous as LVMH and Gucci, Hermes has a history of nearly 200 years, and the Hermes family behind it has also passed down to the sixth generation.
Unlike the Gucci family, the Hermes family pays more attention to the power of the system and human nature in the process of inheritance.
For example, the heir training system prevailing within the Hermès family fully respects the development wishes of family members and stimulates their sense of identity and satisfaction with the family through positive guidance. Jean-Louis Dumas, the fifth-generation head of the Hermès family, once had a classic discussion on this, “The only criterion for satisfaction is that if one day a miracle happens and grandpa returns to this world, he can gently pat the backs of your children and grandchildren and tell them: well done.”
Under the inheritance of true brotherhood and filial piety from generation to generation, when the Hermès family faced Bernard’s hostile takeover, the whole family was united and tough on Bernard. Finally, in the dispute win.
Whenever recalling this past event, the current CEO of Hermès, Bertrand Piecchi, will feel, “We are a united family, sharing the same spirit, that is, to pass on to us the unique treasures we have inherited from our parents. offspring.”
This can’t help but make people feel that if the Gucci family can also develop such a family tradition, they will not have to call a hasty curtain call in chaos. But having said that, although the successful inheritance of the Hermès family has verified the feasibility of the traditional family inheritance system, the behavior of the Gucci family to hand over the full power of management to professional managers also provides a new idea for the inheritance of modern enterprises.
There is no obvious good or bad between the two, only suitable or not.
However, for Bernard, the question is: Has he never made up his mind to choose his successor from among his own children? Or hand over the group to a team of professional managers.
Sidney Toledano, head of the LVMH fashion group, said: “He (Bernard Arnault) never said to me that his children must inherit the family business.”
Instead, it is to “respond” to Macron’s delayed retirement policy and put this thorny issue on hold. “As for the issue of heirs, you may have noticed that the retirement age has been extended, which is very popular nowadays.”
Bernard’s worry is not difficult to understand, after all, the palms and backs of the hands are full of flesh. If the inheritance issue is not handled properly, the resulting chaos will threaten to destroy the entire family, just like the chaos he has experienced and exploited many times.
In order to avoid this future, Bernard began to accelerate his selection inspection. According to foreign media reports, Bernard currently takes time to have lunch with his five sons and daughters at the LVMH headquarters every month. A person familiar with the matter once revealed that “this is not an ordinary family dinner. Before the meal, he will hold the iPad and talk about the topics to be discussed today, and then he will go around the table and ask the children one by one for their suggestions.”
In this suffocating atmosphere, Bernard, who has been strong all his life, is undoubtedly “‘interviewing’ his children. They have to give an answer within 90 minutes, and this answer will determine their future to a certain extent.”
However, this is not determining the future of LVMH.
It is only then that people will remember that the initiative of this “successor war” that has been undercurrent and has attracted much attention from the outside world has been firmly in the hands of the old man Bernard from the beginning to the end.

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