What's going on?

On Monday, luxury conglomerate LVMH � owner of Louis Vuitton, Dior, and Mo�t & Chandon � announced its $15 billion bid to buy US jeweler Tiffany & Co. Clearly someone has expensive tastes…

What does this mean?

Tiffany’s has had a blue year: its second-quarter sales were lower than forecast, and it issued a profit warning after Chinese demand slowed. The retailer is now looking to turn its fortunes around � and LVMH, which has a history of polishing up acquisitions, thinks it can help.

But there�s no guarantee Tiffany’s will marry LVMH for its money, especially after its share price shot past LVMH’s per share bid price on Monday. Tiffany�s is expected to reject the offer � which is only 14 times its earnings, versus the 22 times Michael Kors paid for Versace last year � as an undervaluation. That could trigger a bidding war between LVMH and its two arch-rivals: Gucci-owner Kering and Cartier-owner Richemont.�

Why should I care?

For markets: The pros of consolidation.
The luxury goods industry has seen a wave of mergers and acquisitions in recent years, in part because expanding into growing markets � like China � is so pricey. Tiffany�s has also taken the trade war to heart: it can�t rely on Chinese tourists coming to the US to buy bling, and doesn�t have many of its own stores over there. It�d benefit from LVMH, then, which has a massive presence in China. LVMH would benefit from Tiffany’s too: it�d have a younger, less wealthy customer base to tap into.


The bigger picture: Making beautiful music.
The LVMH-Tiffany’s deal is an example of a �horizontal� merger, where two competitors join forces. But it�s not the only type of pairing in vogue. A vertical merger � where companies within the same supply chain join up � has worked for Spotify, which bought podcast producer Gimlet earlier this year. On Monday, it hit the high notes with impressive subscriber growth � and investors danced to its tune, sending shares up.