Louis Vuitton’s (LVMH) Business Succession Plan - Learn from the Rich
The Arnault Family is one of the most interesting business succession stories of our generation.
You may have never heard of them before (or their massive holding company, LVMH), but I’m sure you will recognize many of their famous luxury brands: Louis Vuitton, Dom Perignon, Fendi, Bulgari, Gucci, Marc Jacobs, Tiffany and Co. (and a whole bunch of other brands that I can’t pronounce).
So, who are they?
First, you have the patriarch, Bernard Arnault, the richest man on earth (when Tesla’s stock is down) with a net worth of approximately $211 billion.
Apparently, he turned $15 million into $800 million in about 4 years during his younger days and has been compounding that money ever since by buying up luxury brands and creating synergies / economics of scale by leveraging talent and distribution channels across all of his brand platforms for decades.
But it doesn’t stop with Bernard. He has five children who are all impressive in their own right.
You have Delphine, CEO of Christian Dior (the brand)
Antoine, CEO of Christian Dior SE (publicly traded holding company that controls LVMH)
Alexandre, EVP of Tiffany & Co.
Frederic, CEO of TAG Heuer (took position at age 25!), and
Jean, Director of Marketing and Development at Louis Vuitton.
Nepotism? Perhaps, but the children (at least the older ones) spent years learning and growing with the company and have allegedly worked their way up to their positions.
So what’s the plan? What is Bernard (currently 74) going to do with this vast holding? How will he pass the reigns of such extraordinary wealth onto the next generation?
Step one: Let them grow outside the family business first.
It’s common for business owners to prefer that their kids work outside the family business in their early career in order to gain outside experience and perspective. For example, Delphine worked at a management consulting firm for 2 years prior to joining the family business in the early 2000’s.
Step two: Give them a chance to work their way into the business and leadership positions while you are living.
As stated above, they weren’t just given these high positions out of high school, but were placed in lower roles and were promoted up as they proved themselves worthy to lead certain areas of the company.
Bernard also does a monthly 90-minute lunch with all his children at LVMH headquarters where he presents management questions / topics surrounding the company and then he gives all his children time to discuss their opinions / thoughts on the matter.
Step three: Try to keep some distance between them.
You’ll notice each child holds distinct roles within the larger company as to not overlap each other’s authority. This is a luxury that some small business owners don’t have, but if one child is introverted and prefers the numbers side of things while another child is extroverted and has a knack for sales and marketing, then you should be able to separate them enough to prevent head-butting (at least while you are living) by having them divided among different divisions within the business.
Step four: Keep it equal.
Bernard placed LVMH into another private holding company (rich people love holding companies) that is owned equally among his five children and through that vehicle they have power to take control of LVMH. The fact that Bernard has given his children the ability to oust him is unusual, but the splitting of ownership 20% between the five of them makes sense assuming he has provisions in place in terms of how and when a child can sell his/her ownership interest (also known as a buy-sell agreement in US terms).
Despite the careful steps Bernard has taken to preserve his legacy, it is still anyone’s guess who will ultimately take control of the company and whether the children will continue to work together after his death. For better or worse, most of us don’t have an estate plan worth hundreds of millions, but that doesn’t mean we can’t try our best to plan ahead like the Arnault family.
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Joseph M. Lento, J.D.
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