Chanel and MB&F Announce Partnership

[harrison_cheng]

https://en.worldtempus.com/article/b...nel-78924.html

[CNY]

Max and his team deserve the payday, and I’ve enjoyed some of Chanel’s pieces. Looking forward to what it brings.

[ChetBaker]

Well. Not sure I like this. You can debate ownership % and day to day decision-making, but at what point do you simply become part of a conglomerate similar to Lange, VC, Breguet. Same applies to FPJ of course.

[FrugalGreubel]

Happy for Max and the rest of the MB&F team. I try not to be pessimistic about things like this so I hope it’s only good things for the brand going forward. I’m not a current owner but hope to be one someday.

[kunlun]

Originally Posted by ChetBaker

Well. Not sure I like this. You can debate ownership % and day to day decision-making, but at what point do you simply become part of a conglomerate similar to Lange, VC, Breguet. Same applies to FPJ of course.

Chanel's owner is a bigtime watchguy.

Think of it aa an inoculation that prevents disease. Chanel coming in as minority stakeholder prevents possiblitlity of having to sell out to a conglomerate later.

[enjoythemusic]

mbf-tribe.jpg

[ChetBaker]

Originally Posted by kunlun

Chanel's owner is a bigtime watchguy.

Think of it aa an inoculation that prevents disease. Chanel coming in as minority stakeholder prevents possiblitlity of having to sell out to a conglomerate later.

I understand the idea. But what’s the difference between a Vacheron being owned by Richemont or FPJ and MB&F being partially owned by Chanel, which similarly does all kinds of luxury goods, fragrances etc. Is it just the %?

[enjoythemusic]

Fully powned versus just a minor stakeholder.

[WatchEater666]

Love it. Good for him.

[ChetBaker]

Sure - i’m just nitpicking here. Think where I was going is where does an independent stop being an independent. Would 49% shareholding still be ok, what if Chanel sets sales targets or volume growth. These guys are not in it for the love of it. It’s a slippery slope. After De Bethune, FPJ, Parmigiani, MB&F looks like we’re saying goodbye to the fully independent manufacturers of old. Not very romantic, but perhaps not a problem at all and being part of a larger group is just needed to secure the long-term viability.

[raclaims]

25% or more or less than 25%, it's still a significant change to day to day business for an independent business that is used to being fully independent. Now it could bring a benefit to operational efficiencies or shared resources or access to talent etc., which should help them lower their prices and increase profitability. It could also create internal strife and grief...we shall see.

[dmb359]

Happy for Max and the team, and hope it all works out great and there's many more great timepieces to come.

It's my favorite independent brand

[GB-man]

Based on what we have seen from journe I don’t foresee any forcing of the hand by Chanel. Journe could have doubled or tripled production in the last decade and chooses not to. I see this as positive news for MBF just as I did for FPJ. I don’t see how it’s any relation to richemont brands that are entirely owned and many have long been detached from the founding families etc

[kunlun]

Originally Posted by ChetBaker

I understand the idea. But what’s the difference between a Vacheron being owned by Richemont or FPJ and MB&F being partially owned by Chanel, which similarly does all kinds of luxury goods, fragrances etc. Is it just the %?

It's a giant difference.

Vacheron is owned wholly and is affected by the need to generate short term shareholder value.

Chanel is privately owned by a guy who collects watches. And he takes a minority stake that gives the watch company liquidity in the event of market ups and downs but does not change the direction or values or freedom of the watchmakers to execute their vision, but rather supports these.

As a p.s. what people miss is that FPJ was, from early on, fronted by a group of investors who are watch loving friends of François-Paul. The head of Chanel is just one of these exact types of personal friends of FP who came in to join the others and support FP's work.

[ChetBaker]

There can certainly be a difference - but to me as a collector it becomes a sliding scale and a matter of degree, with full independence (financial, strategy, marketing, watchmaking) and group-owned (focus on short-term shareholder value) at the extreme ends of the spectrum. Once you sell a stake in your business to secure third-party financing, at the very least you’re no longer financially independent. You will also naturally lose a certain degree of control over the direction of the brand, there’s no free lunch in the end. So are you still truly an “independent” in the strict sense of the word, and does that even matter to collectors. Put differently - would collectors prefer the old MB&F or the new MB&F, assuming of course that both set-ups would be equally viable long-term?

[vliberman]

Originally Posted by ChetBaker

There can certainly be a difference - but to me as a collector it becomes a sliding scale and a matter of degree, with full independence (financial, strategy, marketing, watchmaking) and group-owned (focus on short-term shareholder value) at the extreme ends of the spectrum. Once you sell a stake in your business to secure third-party financing, at the very least you’re no longer financially independent. You will also naturally lose a certain degree of control over the direction of the brand, there’s no free lunch in the end. So are you still truly an “independent” in the strict sense of the word, and does that even matter to collectors. Put differently - would collectors prefer the old MB&F or the new MB&F, assuming of course that both set-ups would be equally viable long-term?

How selling a minority stake removes any financial independence given that Max owns 60% of the firm???? I would say it increases financial independence as alternative would be debt that potentially can be used to cram down Max's equity position in event of distress.

[llngoc]

Originally Posted by kunlun

It's a giant difference.

Vacheron is owned wholly and is affected by the need to generate short term shareholder value.

Chanel is privately owned by a guy who collects watches. And he takes a minority stake that gives the watch company liquidity in the event of market ups and downs but does not change the direction or values or freedom of the watchmakers to execute their vision, but rather supports these.

As a p.s. what people miss is that FPJ was, from early on, fronted by a group of investors who are watch loving friends of François-Paul. The head of Chanel is just one of these exact types of personal friends of FP who came in to join the others and support FP's work.

Originally Posted by ChetBaker

There can certainly be a difference - but to me as a collector it becomes a sliding scale and a matter of degree, with full independence (financial, strategy, marketing, watchmaking) and group-owned (focus on short-term shareholder value) at the extreme ends of the spectrum. Once you sell a stake in your business to secure third-party financing, at the very least you’re no longer financially independent. You will also naturally lose a certain degree of control over the direction of the brand, there’s no free lunch in the end. So are you still truly an “independent” in the strict sense of the word, and does that even matter to collectors. Put differently - would collectors prefer the old MB&F or the new MB&F, assuming of course that both set-ups would be equally viable long-term?

When Journe let Chanel became a 25% stakeholder, we had the same debate. In Max's case, I think it is the same motivation to ensure the brand will continue to thrive beyond him as an independent. It is to prevent the exact situation where someone like LVMH, Richemont, etc to scoop in and destroy the independence of the brand. Especially when FP and Max's children may have no interest of taking over the business.

One thing I found funny is that the only complain I have with any MB&F watches is the deployant buckle and it is the part supplied by Chanel.

Only time will tell but the most example I can think of was LVMH's attempted hostile takeover of Hermes. And fortunately the heirs were able to fend off LVMH.

[GB-man]

Not that it matters but Chanel’s stake in FPJ is 20% not 25.

[WatchEater666]

They’ve done a good job with FPJ and Gauthier.

[joli160]

Good for them. Chanel knows a thing or two about running a business and maintaining brand value

[enjoythemusic]

Originally Posted by WatchEater666

They’ve done a good job with FPJ and Gauthier.

+1

And Chanel have a stake in Kenissi (Tudor, etc).

[mickyd329]

At 25% equity, Chanel won't have a say in the operation of the business. Max is in full control. The only caveat is how the exit clause is written. If Chanel decides to sell their shares and exit the business, how does Max come up with the funds to buy them out? That would be the only poison pill that could affect the decision making process day to day. If an internal strife should happen, the threat of pulling out by Chanel can upset the cards.

[llngoc]

Originally Posted by joli160

Good for them. Chanel knows a thing or two about running a business and maintaining brand value

Not sure about that according to my wife (which is our in-house expert on this subject ). The multiple price hikes with lowered quality have driven a lot of people to other brands like Hermes. Hard to see Hermes as a value brand but when Chanel is costing more than Hermes, I know which brand will most people pick. My wife's Chanel SA used to be really low key but now my wife gets text on "offerings" every 1-2 weeks.

[WatchEater666]

Originally Posted by mickyd329

At 25% equity, Chanel won't have a say in the operation of the business. Max is in full control. The only caveat is how the exit clause is written. If Chanel decides to sell their shares and exit the business, how does Max come up with the funds to buy them out? That would be the only poison pill that could affect the decision making process day to day. If an internal strife should happen, the threat of pulling out by Chanel can upset the cards.

Likely just lever up and complete the buyout. I just did this with one of my cos last year. It’s common.

[ajw45]

Originally Posted by llngoc

Not sure about that according to my wife (which is our in-house expert on this subject ). The multiple price hikes with lowered quality have driven a lot of people to other brands like Hermes. Hard to see Hermes as a value brand but when Chanel is costing more than Hermes, I know which brand will most people pick. My wife's Chanel SA used to be really low key but now my wife gets text on "offerings" every 1-2 weeks.

Right. Chanel along with Kering, LVMH, Richemont, and Hermes have all increased priced dramatically, reduced quality (maybe not Hermes), and sought to further limit accessibility. A minor investment today is the foot in the door for a more substantive stake tomorrow. Tomorrow might still be a decade or two away but once the founders are ready to hit the beach and/or they screw up and require additional capital, Chanel will be there to take over. At that point there's no reason to think they won't do like they do with their core brand that has made them so successful - margin expansion through both higher prices and cost cutting. Sure, the brands will live forever but will sacrifice the enthusiasts in favor of luxury customers.

[llngoc]

Originally Posted by ajw45

Right. Chanel along with Kering, LVMH, Richemont, and Hermes have all increased priced dramatically, reduced quality (maybe not Hermes), and sought to further limit accessibility. A minor investment today is the foot in the door for a more substantive stake tomorrow. Tomorrow might still be a decade or two away but once the founders are ready to hit the beach and/or they screw up and require additional capital, Chanel will be there to take over. At that point there's no reason to think they won't do like they do with their core brand that has made them so successful - margin expansion through both higher prices and cost cutting. Sure, the brands will live forever but will sacrifice the enthusiasts in favor of luxury customers.

Let's hope the investment from Chanel in RG, FPJ and MB&F are based on the brothers' own interest in watches and not pure corporate greed. A lot of us have a bit of physical and emotional investments in these brands. It will be a shame if they followed the path of Vacheron, Breguet, etc once the founders are gone.

Only time will tell. My concern with independents is long term serviceability of their watches and investment from Chanel will likely help in that aspect. In the meantime, let's enjoy it while it is still great.

[ajw45]

Originally Posted by llngoc

Let's hope the investment from Chanel in RG, FPJ and MB&F are based on the brothers' own interest in watches and not pure corporate greed. A lot of us have a bit of physical and emotional investments in these brands. It will be a shame if they followed the path of Vacheron, Breguet, etc once the founders are gone.

Only time will tell. My concern with independents is long term serviceability of their watches and investment from Chanel will likely help in that aspect. In the meantime, let's enjoy it while it is still great.

If that was what they wanted to do they would have invested personally, they are rich enough to do that. Doing it under the Chanel group means this is not just a passion project or patronage. Our emotional attachment to the brands is exactly what they are investing in, it is the brand equity not the watch making.

[GB-man]

Originally Posted by ajw45

If that was what they wanted to do they would have invested personally, they are rich enough to do that. Doing it under the Chanel group means this is not just a passion project or patronage. Our emotional attachment to the brands is exactly what they are investing in, it is the brand equity not the watch making.

I would think there are financial/tax benefits to using the business to make the investment?

[ajw45]

Originally Posted by GB-man

I would think there are financial/tax benefits to using the business to make the investment?

Possibly, not knowing enough about Chanel, the CEO, or EU accounting I haven't a clue. It's an asset and given the value of Chanel I imagine the founder would have had no problem getting it financed personally if he wanted.

[GB-man]

Originally Posted by ajw45

Possibly, not knowing enough about Chanel, the CEO, or EU accounting I haven't a clue. It's an asset and given the value of Chanel I imagine the founder would have had no problem getting it financed personally if he wanted.

I’d love to see this guys watch collection. Imagine the one offs lol