The Ross and Rachel of the corporate world have reconciled.
Back up. Last November, LVMH proposed to Tiffany with a pretty expensive ring. The conglomerate - owned by France’s richest man - announced it was acquiring the jeweller for $16 billion.
Then, coronavirus happened
and LVMH got a bitter dose of buyer’s remorse. It tried to wriggle
out of the marriage and blamed it on two things:
- A weird letter from the French government; and
- Tiffany’s sales fell 29% during the pandemic, meaning it was no longer the PYT that LVMH had fallen in love with.
Tiffany didn’t take the heartbreak well. It filed a suit in Delaware, arguing a letter and regret weren’t valid reasons to divorce. LVMH sued back, saying the way Tiffany’s management handled the pandemic (badly) triggered the ‘material adverse effect’ clause in their agreement.
Translation: the pandemic was an unforeseen change of circumstances that reduced Tiffany’s value, so no deal.
Now the former power couple have reconciled
, lowering the price of the acquisition to $15.8 billion. The merger will take place early next year.
LVMH realized divorce was unlikely.
Delaware courts have only called off a deal because of an MAE clause once
. So LVMH took out the Sun Tzu playbook, played strategy, and decided to put a ring on Tiffany after all - just one with a smaller diamond.
Pretty thrifty for a luxury conglomerate.
Zoom out: lawyers were waiting to see how COVID affects M&A deals. Turns out, not much.