The mystery surrounding Arnold's succession is unnerving LVMH shareholders More and more investors are demanding clarity on the future of leadership

Every day that goes by, Succession seems more and more like a documentary. And we’re not talking about the chaos unfolding in the United States. As reported by Reuters, tensions are rising at LVMH because a growing number of shareholders in the mega-group are demanding clarity on the succession plans put in place by Bernard Arnault. After four decades of leadership, the businessman continues to play his cards close to his chest about what the handover will look like when he eventually steps down, a moment that, for now, seems far from near. According to some, this veil of mystery surrounding the succession plans could begin to weigh on the company’s share price.

Indecision or calculated ambiguity?

Bernard Arnault is 76 years old and is the richest man in France. The issue, however, does not seem to be his leadership itself, but rather the fact that no one has any idea what could happen in the event of the unexpected. After all, LVMH is a $350 billion empire, owning nearly 70 different companies, with branches as vast as the sums at stake for such a large number of shareholders. But is the decision not to disclose anything about succession pure indecision, or the result of a strategy designed to keep shareholders in line?

Publicly identifying an heir - a bit like in George R.R. Martin’s novels - would inevitably lead to a shift in the company’s internal power dynamics. But spokespersons for the mega-group, which is presenting its annual results today, said that succession plans are not currently made public, but do exist both for the medium term and for sudden and unforeseen events. According to their version, Arnault has chosen not to share them outside his inner circle.

According to other shareholders quoted by Reuters, there is actually no plan at all: Arnault is said to be buying time while waiting to see which of his five children proves most suitable. In any case, last year the chairman and CEO of LVMH raised the maximum age limit to remain in his role to 85, essentially signaling that he has no intention of stepping aside for at least another decade. And yet, according to Paul Moroz of Mawer Investment Management, the more time passes, the more problematic the inevitable transition will be.

Theories on what could happen

In reporting the news, Reuters refers to an interview Arnault gave to CNBC last December. «Let’s talk about it again in ten years,» Arnault said, «I’ll be able to give you a more precise answer.» He also added: «As for my children, I’ve tried to explain to them since birth that they are very lucky to be in a family that has the opportunity to run a group like this. But to take on responsibility, they must earn it and prove they can do it.» A few years ago, however, speaking to the NY Times, Arnault did not even rule out the possibility that the successor could be external.

Among those who believe there is a plan, those who believe there isn’t, and those who closely follow the careers of Arnault’s five children to determine who appears furthest ahead in the race (Antoine seems to be leading, but Dior’s rebrand under sister Delphine could reveal another favored contender), many of Reuters’ sources say that this uncertainty could eventually weigh on the share price, since the chances of a sudden crisis can only rise, not fall. In any case, even if a plan is not publicly known, a general idea of what will happen does exist and revolves around the family holding company Agache.

The Arnault dynasty’s vault

In 2022, the holding company Agache Commandite SAS officially became the family vault, meaning the entity that controls the majority of LVMH’s voting rights, evenly divided among the five children, each owning 20%. The second Agache can take control of the holding that controls the other holdings - known as Agache SCA - should the position held by Bernard Arnault become vacant.

Therefore, if this unpleasant scenario were to occur, Arnault’s heirs would in any case hold collective power over the company, and their decisions would have to be made through a voting process. According to Agache’s bylaws, only the five siblings or their direct descendants can be shareholders in the company, and no one can sell shares until 2052.

As a side note, it should also be said that even if Arnault were to step down from his role at LVMH, he would still remain managing director with unlimited powers at Agache until the age of 95. In reality, as long as Arnault remains alive, his direct or indirect control over LVMH will remain solid. According to Reuters, even a temporary division of power among the five siblings represents a fairly high risk factor, a possibility that LVMH has ruled out in any case.