Sunday, August 3, 2014

"I look at a hundred deals a day. I pick one."

So now with most of the dust settled and the press releases read, re-read, written and re-written maybe it might be a good time to have a look at the bigger picture.

Now many more revered and respected have held forth, many insisting that they saw the acquisition of Ulysse Nardin coming "a mile away!"  Well, hindsight by its very nature is often 20/20.  So I thought I would call on that all-time humanitarian Gordon Gekko to perhaps view this in a slightly more pragmatic light.

 "He's right, I had to sell. The key to the game is your capital reserves, If you haven't got enough, you can't piss in the tall weed with the big dogs."

I think in light of all of the speculation, the one question I have not really heard asked is - maybe, just maybe they actually NEEDED to sell?  Ulysse Nardin was a media darling in the age of Schnyder, and by that I mean the age of Rolf Schnyder.  Like every brand re-boot, (and if we are very, very honest with ourselves, this is what it was) a charismatic, iconoclastic visionary is needed.  But that in and of itself is not enough (note Blancpain and Hublot in the "post Biver as Patron" era).  You need something more.  The meeting of Schnyder and Ludwig Oechlsin was perhaps not unlike the meeting of Smith and Wesson… or perhaps more appropriately the meeting of Lorenzo de' Medici and Michelangelo.  Two things happened that took the steam out of UN's engine - Dr. Oechslin opted to pursue a life of the mind and "museum curatorship", and tragically, Rolf Schnyder died.  As it is a privately held company, we can speculate all that we want, but if I am viewing things through "Gekko The Great's" perspective, they needed to sell.  And it is possible that maybe there weren't that many takers, so they took.

"It's not bad for a quant, but that's a dog with different fleas."

The other popular thought out there is that there was a bidding war and that somehow Richemont, LVMH and the mighty SWATCH got pipped at the post by Kering.  Survey says……. NAAAAHHHHH!

The Ulysse-Nardin that got sold is not the Ulysse-Nardin that was.  Moreover, it is not on a level with some of the recent blockbuster acquisitions like Harry Winston.  It is a great brand, but it represents a truly niche market.  SWATCH does not want or need a charming brand like UN.  Richemont has a fairly full stable.  LVMH?  Well let's just say that although there is turmoil under heaven, the situation is not exactly excellent.  

"The most valuable commodity I know of, is information"

But more importantly is what Ulysse-Nardin represents - information and innovation.  With Unlysse-Nardin backing what is said to be up to 1/3 of ochs und junior (Ludwig Oechslin's dream factory), and with Dr. Oechslin said to be retiring from the museum, it is not outside of the realm of possibility that the magic could be returning to UN.  Let's be clear, ochs und junior is most likely never going to be a profit leader, (and if what Beat Weinmann has said, it is not intended to be).  But let's just say it is an inexpensive item to carry on the balance sheet to keep the sorcerer in the court.

"You gonna tell me the difference between this guy and that guy is luck?"

Remember pals and gals, although we always think of Kering as the OWNER of Girard-Perregaux and JEANRICHARD - they are more accurately the majority stake holder with 51%.  So the fact that they have plumped for 100% of Ulysse-Nardin actually gives them a better, unfettered toehold in the luxury watch segment.  And it is not down to luck that they were the eventual buyers.  

Don't get me wrong, UN is going to be a project, but with the experience of working with Girard-Perregaux and completely revamping and "re-birthing" JEANRICHARD, Kering now has some good experience with updating and reviving an existing brand while not "throwing out the brand DNA with the bathwater".

"...bright but not bright enough,  Sherlock, roll the dice and play a little Monopoly what box would Sir Lawrence land on in Erie, Pennsylvania?"
Those out there convinced that Richard Mille is next on the acquisitions list… maybe, but I don't think so.  Let's just say that there are too many hurdles.  Richard Mille first leaked that the acquisition would happen, and Kering (then PPR) disclosed that although those conversations had happened, it would not move forward until Mille untangled "personal affairs".  That was more than a year ago.  And it is possible that Kering spent most of it's pocket money on UN.

Other pundits have posited Breitling, Chopard among others as being on the potential hit list.  Maybe, but instead of thinking high prestige, it might be time for Kering to think high volume.  Maybe, say, a brand making watches in the Mido price range?

I could, of course, be wrong - I've been wrong before ; )

Finally, let's remember that although we are all passionate, for many people this is simply business -

It's all about bucks, kid. The rest is conversation.

Enjoy your watches!

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