The Taste of Luxury.
By Nadege Forestier and Nazanine Ravai Bloomsbury; 203pp; £17.99.
Review by Simon Caulkin.
When the two French luxury houses of Louis Vuitton and Moet-Hennessy announced their merger in 1987, it was inevitably dubbed the marriage of the century; champagne, cognac; roses, perfume and the most exclusive luggage in the world - what better trousseau could any couple have than this exclusive product line? Hello magazine could not have organised it better.
Yet the commentators - including this one - who politely wondered at the time about the wedding prospects of two such determinedly individualistic partners should have been a lot more sceptical than we were. LVMH began to go wrong right from the start. Not only was the union never properly consummated at corporate level, one of the partners, Vuitton sprightly septuagenarian chairman, Henry Racamier, was soon badly egging on a younger man to oust the rightful husband.
The younger man was the cool and extremely clever Bernard Arnault, scion of the northern building firm who had engineered a starling takeover and turnround of the bankrupt textile empire Boussac. Arnault did indeed shake up the LVMH boardroom; but having installed himself in the boudoir, as it were, he promptly proceeded to kick out the troublesome Racamier as well. By 1991, after protracted legal wrangles. Arnault was undispated master of the world's number one luxury group and one of the most important names on the French stock exchange.
Such is the raw material of Forestier and Ravat's hurried - and finally unsatisfactory - book, which recounts the rise of Arnault and his move into the LVMH boardroom in racy detail. Unfortunately, the authors do not seem to have been able to interview any of the principals in the story, with the result that Arnault, in particular remains a shadowy, indistinct figure. The account also suffers (to get other grumbles out of the way) from unhelpful and sometimes sloppy editing, which leaves the text resolutely unanglicised and the otherwise adequate translation unsmoothed. "There is a flagrant underestimation of real estate patrimony", one cross shareholder is made to exclaim. There is, however, a useful index.
Fortunately, the narrative itself provides plenty of material for thought, even if the reader has to draw the lessons him-(or her-)self. After all, the ironies abound. First and most obvious of the LVMH merger was to render the family companies invulnerable to hostile takeover.
So they would have been, if Racamier hadn't enlisted the help of outsider Arnault as an ally (as he thought) in his battle to wrest control from Moet Hennessy.
The second irony is that, in the midst of the backstabbing and general mayhem that paralysed the company at corporate level, the poor bloody infantry in the operating companies continued to turn in spectacularly good results. As the authors point out, the group structure existed only in the mind. There was no such thing as LVMH vulture, just a host of individual cultures, all jealously guarded and upheld - as they must be in the case of such exclusive brands.
That prompts the question; who needed the corporate centre in the first place? If it couldn't even stave off Arnault's takeover - its principal justification - it actually subtracted from, rather than added value to, the group is a whole. For existing shareholders, managers and workers, the whole LVMH affair, from the original merger to the Arnault coup, was an exercise in futility.
This connects with the third issue that the story raises the future of corporate governance as a whole. At a moment when many people would hope that practice in the new Europe would coverage on the Continental model, with a wide range of stakeholders having a say in the corporate destiny. Arnault's was an old-fashioned power play. It was simply a raid, taking its character from the alternative model or corporate control, the red-blooded market which disfigured the 1980s in the UK and US. Is this how we want the future of European companies to be decided in the single market? There is a particular - as well as a general - point to the question.
Taken by surprise by Arnault's adept financial ploys, the French establishment has since changed the rules, making it harder to carry out a similar transfer of power without a full-blown takeover - at least in France. But as this book makes abundantly clear, Arnault is young, impatient and not averse to thinking the unthinkable.
What about the rest of Europe? Arnault just happens to own as 24% stake in Guinness (balancing the 25% that Guinness holds in LMVH) - by far the largest single shareholding. Need one say more? If I were Anthony Greener I would certainly have taken my precautions.
Simon Caulkin is a freelance writer.