Bernard Arnault

Four decades passed the billionaire today Bernard Arnaultdeveloping the manufacturing company he inherited from his father into the LVMH group that holds a leading position in the luxury sector.

Methodical, exacting and sometimes ruthless, the 75-year-old remains deeply involved in the management of his empire and does not like to discuss the succession with outsiders. But behind the scenes the billionaire, who in 2022 raised the age limit for his role as chief executive to 80, is carefully laying the groundwork for his five children to one day lead the company worth almost 400 billion euros.

Two of his sons are set to join LVMH’s board at its annual meeting on Thursday, leaving only the youngest without a seat, as Arnaud prepares for the… generational handover both within his family and among the executives who work together their.

“Five years ago, you could argue that if something happened to Arnault, you would have an interim, non-family CEO while you wait for the children to grow up and gain more experience,” Erwan Rambourg, global head of consumer research at HSBC. “Now there is no need for this middleman as all the preparation has been done,” he added.

At stake is the future leadership of the world’s largest luxury group, which includes fashion houses such as Dior and Louis Vuitton to hotels and jeweler Tiffany & Coat a time when the broader sector is struggling with a slowdown after an unprecedented pandemic-era boom.

It is too early to say who will take the top job: although his eldest child, Delphine, holds the most senior position in his empire as chief executive of Dior and a member of the executive committee, analysts point to possible scenarios according to which two or more of the heirs could manage the company jointly.

LVMH’s size and market share also mean its next generation of leaders will have to be more inventive to sustain growth and will no longer be able to rely on China, which drove the industry’s expansion for much of the past decade, to give impetus.

The case of Lagardère

Arnaud, whose family owns 48% of LVMH’s share capital and 64% of voting rights, is seeking to avoid the fate of other French business dynasties, where mismanaged successions can sink fortunes.

In the rarefied world of France’s business elite, the fall of the Lagardères acts as a “red flag”. Created in 1992 as Matra, Hachette & Lagardère, the group had two arms, Lagardère Publishing and Lagardère Travel Retail. While the book and e-publishing sector (Lagardère Publishing) includes the major printer Hachette Livre, the Travel Retail unit includes retail outlets, mainly in airports and train stations.

The group’s business scope also includes other activities, which mainly include Lagardère News (Paris Match, Le Journal du Dimanche, Europe 1, Europe 2, RFM and the license to use the Elle brand), Lagardère Live Entertainment (concert production and performances and venue management) and Lagardère Paris Racing (sports club). On November 21, 2023, Vivendi completed the purchase of a majority stake (60%) in Lagardère.

Avoiding a similar fate at LVMH is of the utmost importance. All of Arnault’s children work at the group, where they have been matched with mentors among its top executives, having been prepared for their roles from a young age, accompanying him as teenagers on weekend store visits or overseas business trips.

The new members who will join the group

Shareholders on Thursday will vote on the board appointments of Alexandre Arnault, a 31-year-old senior Tiffany executive, and his 29-year-old brother Frédéric, who was recently appointed head of LVMH Watches. Delphine, Christian Dior’s 48-year-old chief executive, and Antoine, the group’s 46-year-old head of image and communications, took their posts at around the same age. while Arnault’s youngest son, 25-year-old Jean, director of watches at Louis Vuitton, is expected to follow soon.

Three of the five children have been appointed to new roles within the group and its portfolio companies from early 2023, including Delphine’s appointment as head of Dior, the group’s second-biggest brand, last February.

Family above all else

Under a structure Arnault created at the family holding company in 2022 to strengthen long-term control and unity, family members each have an equal vote and must be unanimous on major decisions involving LVMH, such as changes to their share capital or the strategic direction of the group. Arnault sees business experience as the ideal training ground for this, and regularly organizes lunches with the five children to discuss the business.

The Lagardère affair is not the only one Arnault has reflected on as he works to ensure the longevity of his empire. The decline and breakup of US conglomerate General Electric is another, while many of the assets he bought to build his empire – including Christian Dior – were acquired from family dynasties that had fallen on hard times.

Retirement of executives

As the next generation steps up, today’s… deputy leaders step aside to facilitate it.

In addition to the changes in family roles, group chief executive Antonio Belloni is expected to step down after 23 years as Arnault’s right-hand man, to be replaced by Stéphane Bianchi, LVMH’s head of watches and jewellery, who is a veteran of the family succession at the Yves Rocher cosmetics group.

For investors, the handover was expected as top LVMH executives such as Sidney Toledano, 72, and Michael Burke, 67, are getting older. LVMH’s track record of selecting leaders is strong, and Arnault is known for ruthlessly ousting those who don’t live up to the task, but that dynamic is changing as the next generation of the family steps up.

“These are big positions to fill after the Burke, Belloni and Toledano generation who are great managers,” Flavio Cereda, luxury portfolio manager at fund manager GAM, told the FT. “The danger now is that he could be blindsided by the family. In other words, he may give too much responsibility to his children as opposed to an external administrator who could do a better job,” he added. “To be clear, we have no evidence of this, but this was not a risk before because, with the exception of the two older children from the first marriage, the rest were very young.”

The next CEO, Stéphane Bianchi

Bianchi’s role and the future

While much of the attention has focused on the family’s transition, the elevation of Stéphane Bianchi to group chief executive is at the heart of the new phase LVMH is entering.

The 59-year-old joined in 2018, which makes him relatively new by LVMH’s standards, while most top managers’ time at Arnault’s side is measured in decades.

He is credited with helping family business Yves Rocher overcome a difficult generational transition after the founder’s death, grooming scion Bris Rocher – just 19 when Bianchi became chief executive in 1998 – to take over the business.

Bianchi’s promotion is “the key indication of next generation preparation,” HSBC’s Rambourg said. “He has an unprecedented reputation in France for saving the Yves Rocher group and preparing the next generation there. That’s why you want someone like him.” “There are people who are more committed to being in the trenches. “Bianchi is one of the executive community and the most senior team who is able to be a top leader and a good ‘coach’ at the same time,” he added.

LVMH’s emerging leaders will also need to be even smarter to continue growing in a more mature global luxury market, where the group already dominates, and without the same push from China. Cereda estimates that LVMH has gone from a 14% share of the global luxury personal goods market in 2018 to 24% today – and could rise to 30% in the coming years.

Source: ot.gr