Two prime movers in fashion, LVMH and Richemont, have recently made headlines due to LVMH founder and CEO Bernard Arnault. The multi-billionaire has taken a personal equity stake in Richemont. The amount of shares that Arnault has acquired is confidential, but the news of his purchase raised Richemont’s market value by a colossal 4 percent. The LVMH CEO had previously stated publicly his admiration for Richemont and the quality of their maisons, particularly in their ability to turn small businesses into success stories, like the recent acquisition of Italian jeweller Vhernier.

For the last few years, speculation has been growing over a potential purchase of Richemont by LVMH. LVMH is already the biggest kid on the block by far. And by big, we mean Europe’s largest market cap, standing at $382.88 Bn (as of July 2024). The consultancy firm Asterès reported that this luxury house was responsible for four percent of France’s exports, more than all of France’s wine combined. When looking at the make-up of LVMH, this fact begins to make more sense: Louis Vuitton, Dior, Moet, Hennessy, Givenchy, Marc Jacobs, Tiffany & Co., and Dom Perignon are just a few of the 75 maisons.

So, what about Richemont? It’s certainly no small fish, with a market cap of $76.76 Bn (as of July 2024) and comprising IWC, Cartier, Van Cleef & Arpels, Piaget, Montblanc, Net-A-Porter, and Baume & Mercier amongst others. Richemont’s focus on “hard luxury”, such as watches and jewellery, has paid off in uncertain economic climates. Yet, the difficulties with YOOX NET-A-PORTER Group have stunted their potential. 

The move could lead to colossal synergies and cost efficiencies, further solidifying LVMH's dominance. For example, say LVMH sources its leather for its handbags from a supplier with high quality materials at a low cost; the companies under Richemont would benefit greatly from these new suppliers. A purchase by LVMH would further diversify their portfolio, and so less affected by economic and social fluctuations.

However, such a monumental acquisition would undoubtedly face scrutiny from regulatory bodies concerned about market monopolization. It is impossible to know how regulatory bodies around the world would react to such a reduction in competition.

If LVMH paid the hefty sum to acquire Richemont, who would compete against this behemoth? The Kering Group may provide some useful competition once they have finally turned around their main house, and current issue, Gucci. The recent Gucci show in Milan by new creative director Sabato de Sarno did not spur hope among Kering management. Kering’s share price reached a five-year low in June 2024, whilst LVMH’s share price seems to continually rise. This is not to say that Kering is not also an influential economic force. With Kering at €338 a share, it does provide a fair amount of competition to LVMH. With plenty of spare capital, both French holding companies donated a jaw-dropping €300 million to the restoration of the Notre Dame after the fire in 2019. Yet, with the current share price of €720, LVMH ever creeps into a world of its own.

So, who’s in the way of a potential Richemont purchase? South African billionaire and owner of Richemont, Johann Rupert. In May, Rupert declined reports that Richemont is up for a sale to anyone, including LVMH, having previously rejected Kering; it may be a point of principle to not sell to a competitor like LVMH. However, Rupert did mention that himself and Arnault are in constant friendly communication. The question still remains: does Rupert have a price? And if Arnault offers a sum that is hard to say no to, we do know that there will be quite a few zeroes at the end of the cheque.

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