Integration at Tiffany’s

 

7 Key Integration Initiatives and Objectives to Consider
By Mark Herndon, Chairman of M&A Leadership Council

The recent acquisition of Tiffany & Co. (TIF) by LVMH Moët Hennessy Louis Vuitton (LVMH) was not technically a hostile takeover, but given the outright insults, threats, lawsuits, back-channel dealings, and portended government intervention – it certainly could not have been more hostile.

Originally announced in October 2019, LMVH fought hard to nullify the deal due to the pandemic. Tiffany & Co. fought equally hard to maintain the deal and realize a hefty deal-price premium. On December 31, LMVH announced that Tiffany & Co. stockholders had overwhelmingly voted to approve the slightly modified deal price agreed on October 29, 2020. The transaction closed on Thursday, Jan. 7, 2021.

Before sabering that fine bottle of Dom Pérignon you have been saving these long months to celebrate deal closing, consider this. Given the lengthy transaction cage match LVMH and TIF have endured, the real risks are just about to begin.

Integrating well is never easy. It becomes a Herculean task following combative transactions. Even for experienced acquirers like LMVH, consistent historical data, as well as recent studies, continually highlight the fact that between 70-90% of deals fail to accomplish their full financial or strategic objectives (Harvard Business Review, 2020).

LMVH will likely succeed only to the extent they can apply this important definition of integration. “Integration is the process of accelerating the delivery of value expected from an acquisition by leveraging the assets (people, core capabilities, processes, IP, systems and cultures) of BOTH the buyer and the acquired company.”

Based on our work over the last dozen years training nearly 5,000 executives from over 700 companies globally in the art and science of M&A, these seven key initiatives and objectives stand out as paramount for LVMH Chairman Bernard Arnault and his key leaders to consider.

  1. Herald and reinvigorate the Tiffany brand. LMVH knows a great deal about luxury brands. A near-term imperative will be validating and endorsing the historical, current, and future brand attributes of Tiffany & Co. as a valued member of the LMVH family. If the caustic atmosphere of the transaction continues to castigate Tiffany as a weak family member, it may establish an inescapable self-fulfilling prophecy. Conversely, if LMVH invests strategically and appropriately to accelerate essential online and digital sales; make select and timely European and Asian expansions; broaden brand appeal to new and younger customer segments; and mitigate Tiffany’s current over-dependency on the bridal product segment, LMVH has a reasonable probability to restore historical revenues substantially faster than current estimates.
  2. Demonstrate extraordinary diplomacy and leadership. Integration should rarely be a winner-take-all sport between victor and the conquered. Corporate arrogance is historically one of the top 10 integration failure factors. Now that the drama of the transaction is over, both LMVH and Tiffany leaders must quickly adopt a style, tone and general comportment that demonstrate collaboration, transparency, goodwill, and integrity.
  3. Win back the hearts and minds of Tiffany employees and customers. Integration is change management on steroids. Any acquisition or merger ignites a volcano of “me issues” in employees, customers and partners that must be quickly, honestly, and effectively addressed, even though many big decisions can’t, and won’t, be made just yet. Dozens of questions from many different stakeholders must be addressed with candor, tact, and openness. For example, Will I have a job? How extensive will headcount reductions be? What is your intent for the Tiffany brand? What will it be like to work for LMVH? Where will Tiffany’s headquarters be? Will our flagship New York City store be maintained? Failing to engage in these discussions, being evasive or untruthful will be seen for what it is – BS. This is perhaps one of the greatest near-term risks for LMVH, and admittedly, it’s not easy or comfortable to deal with these issues, but employees and customers will remember and talk about how LMVH navigated these rapids for years.
  4. Welcome, engage, retain, and align key Tiffany leaders. Shortly after deal closing on January 7, LMVH appointed three new executives to lead Tiffany including Michael Burke, Chairman; Anthony Ledru, CEO; and Alexandre Arnault, the son of LVMH CEO Bernard Arnault, Vice President of Product and Communications. Simultaneously, LMVH announced that Tiffany’s prior CEO Alessandro Bogliolo, would depart on Jan. 22; with Reed Krakoff, the chief artistic director, and Daniella Vitale, executive vice president and chief brand officer, would also leave after a short transition. LMVH later announced other new top management appointments. However, there are dozens of other key leaders, managers and employees throughout Tiffany & Co. that will be mission critical for at least the next three years, if not longer-term. There are simply too many unknowns and too many differences in operating models, cultures, work processes and systems to let this valuable cohort attrit or atrophy when needed most.
  5. Collaborate to define the turnaround plan and priorities. In addition to retaining the key organizational knowledge of Tiffany leaders and managers, this next step can be especially impactful following combative transactions. LMVH should move quickly to establish a truly joint, mutual, and representative integration project team comprised of key business leaders and functional subject experts from across the combined organization. Rather than arrogantly assuming that LMVH viewpoints, processes, systems, and practices will automatically be the superior and prevailing approach, LMVH should conduct a comprehensive Integration Discovery to fully understand what is working at Tiffany, its functional, geographic, and operating model strengths, capabilities, and best practices. Both sides should be challenged to relentless seek and adopt the best thinking, best systems, and best practices, regardless of which entity is the source.
  6. Implement organizational decisions and headcount reductions with robust fairness and empathy. Nothing much constructive can happen until the organization is set. This requires moving quickly with a robust organization design and selection process to ensure objectivity and fairness in making critical decisions about who will be in what roles, and which jobs will be eliminated. Staffing and reduction-in-force decisions must be implemented with respect, empathy, and support for those deselected as well as those staying. Given the challenging pandemic and luxury industry conditions, LMVH would be wise to take actions beyond those strictly required to help those deselected in their job search. Research and practical experience demonstrate that this best-in-class empathy and support can become a valued part of a brand’s attributes for years to come.
  7. Maximize the customer value proposition from Day 1. The best acquisitions have a clear and compelling customer value proposition (CVP) that is demonstrated consistently beginning on Day-1 post-closing and continuing thereafter. LMVH has a solid history of driving improved financial performance from its acquisitions. What is less clear is why Tiffany’s customers should care. If the viewpoint and expectation of LMVH leaders is limited to “what Tiffany can do for us,” the CVP may never be proven to legacy Tiffany customers. Instead, LMVH should “flip the script” and seek to inspire Tiffany customers with the same sense of awe and satisfaction as when opening their iconic “Tiffany Blue” box. Cross-promotions and cross-product merchandising, brand tie-ins and unique and distinctive experiences leveraging LMVH’s equally iconic brands could quickly intrigue customers and invigorate revenue growth.

Can this acquisition be saved? Yes, but adapting what LMVH’s own lawyers asserted in their September 2020 counter-lawsuit, both executive teams now face the daunting challenge in which there is “no end to (integration) problems in sight.” (WSJ, 12/28/2020)

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About the Author:

Mark Herndon is co-author of The Complete Guide to M&A Integration: Process Tools to Support M&A Integration at Every Level, Third Edition (Jossey-Bass, 2014); and serves as Chairman of the M&A Leadership Council, an educational consortium of global professional service firms, experts, and corporate practitioners in the art and science of mergers, acquisitions, divestitures, and joint ventures. Over the past eleven years, the M&A Leadership Council and its partner organizations have trained nearly 5,000 executives, representing over 700 best-in-class companies from every industry sector in the art and science of MA&D. The M&A Leadership Council actively supports corporate M&A practitioners through a variety of proprietary research initiatives and publications, online and onsite training programs, best practices; and, an industry-first certification for corporate M&A practitioners, the Certified M&A Specialist (CMAS®).

Neither Herndon nor the M&A Leadership Council have been involved in this transaction.