What Does Louis Viton Moet Hennessy KNOW? – #34

Could it be, that LVMH practices all the factors that are described in our BLOGS to retain their position as the world’s largest luxury group by sales? They have identified that wealthy Millenials are shifting their money from goods to exploits. In light of this demographic and consumer shift to travel experiences and exploits, LVMH evaluated and confirmed their data. Once they had confirmed the data they acted quickly to avoid missing a market opportunity. They snapped-up Belmond a fast growing company based in London offering its wealthy customers some of the most opulent travel experiences that money can buy in settings like the Hotel Cipriani in Venice, the Copacabana in Rio de Janeiro and Orient Express trains connecting major European cities. The purchase at $25.00 per share reflected a 40% +premium over the closing price of the stock and valued the business at a price of $2.6 billion. Belmond’s shares have soared by 58% since last August, and in the year ending Sept.30th, pre-adjusted earnings amounted $140million on revenue of $572million.

Why buy Belmond? They deliver to LVMH an immediate synergy in providing the wealthiest Millenials who represent discerning individuals who want to experience exceptional assets located at desirable locations throughout the world. LVMH’s hotel portfolio which includes the Cheval Blanc hotels in Courchevel, the Maldives, St.Barthelemy and Paris. Plus the Bulgari Hotel and Resorts chain.

Analysis of data shows that global spending on the so-called experiences economy, which is being driven primarily by Millenial consumers, is expected to reach $8.2trillion by 2028. That’s why LVMH got the jump, assuring that expanding by buying a successful company will insure being at the peak of demand with a leading product. The Marketing folks at Belmond seem to be on top of their game, and the challenges of being acquired by LVMH will have to be managed carefully in order to maximize the opportunity. A PLAN will play a major role in this absorption of successful units into a cohesive operation. The minute that LVMH key personnel act like they are superior to Belmond’s folks, the magic
will disappear and tragic results will come out of a pairing of two entities that should continue to allow LVMH to maintain their industry leading position.

If possible, the rest of LVHM’ products, besides hotels, should maintain their present distribution channels and not try to immediately use the channels of the newly acquired entity as a distribution channel for all of LVMH products. Let
the initial efforts of the merger become assimilated by both organizations before channels of distribution are adapted to LVMH products as well as those of Belmond.

Here’s the lineup of what products Belmond brings to LVMH:

  1. 46 – Luxury Hotels from $446 to $1206 per night
  2. Numerous Restaurants
  3. Train and River Cruise Properties
  4. Safari Camps in Botswana
  5. The only Hotel in Machu Pichu, Peru

The companies are British and French which represents an immediate cultural clash that both companies have to confront and address. Both firms should have a plan in place for every move that they make. The plan should be clearly spelled out with agreement from both sides of Management before any strategy is implemented. Having watched Acco merge with GBC, and Cheshire with Xerox, I can only inform all the players that might be involved in present and future mergers, that Unless you have a PLAN you will be doomed and experience negative impacts on your companies earnings.. The mistake made by both management teams in an acquisition or merger is that great savings are available in many areas due to two employees doing the identical job of one. It is this approach that causes the greatest resistance by both sides. Make every effort to go slowly and if dismissals are necessary, make them as discreet, speedy and painless as possible. The “fear of the unknown” will cripple any business.

Should you be facing a merger, your management talents will be challenged! Should you need any questions answered, please submit them to us and we will make every effort to reply ASAP. If you need an immediate answer, please call us.