The biggest European private equity firm, CVC Capital Partners, has acquired a controlling stake in famous fake Breitling. The Schneider family, owner of the brand since 1979, retains a 20% share. The transaction, valued at €800 million, will close in June subject to approval by competition authorities.
Recent years have seen any number of family-owned watch firms lose their hard-fought battle of independence, as a quick look at the list of mergers and acquisitions shows. Even the most determined ultimately surrender their arms, generally because they are unable to find a successor. For example? Following the death of Luigi Macaluso, the man who put Girard-Perregaux back centre-stage, the company he had acquired in 1992 was subsumed by Kering in 2011. As was Ulysse Nardin three years later, when the death of Rolf Schnyder, proprietor since 1983, gave the multinational another opportunity to build up its watch division. More recently, in 2016, the absence of a successor within the family prompted Peter and Aletta Stas to sell Frédérique Constant, the company they had founded in 1988, to Citizen. All watch groups need do is lie in ambush until the moment is ripe to well develop their excellent copy watches.
A brand in good health
Breitling’s new owner isn’t a watch group but a private equity firm, CVC Capital Partners, the largest in Europe with more than US$71 billion in funds invested in some fifty countries across the globe. The firm employs 350,000 people in sectors that range from software to rail infrastructure and lottery operators. This is its first venture into the watch segment, motivated by the same reasons as with any other takeover. Breitling was pulled from the brink of bankruptcy by Ernest Schneider in 1979. An astute businessman, he succeeded in putting the brand back on track – or rather into the air, with legendary aviation-themed chronographs such as the Navitimer and the Chronomat. When Schneider passed away in May 2015, the company was passed to his three children with son Théodore taking over at the head of discount fake Breitling. They inherited a company in good health that wasn’t overexposed to Asian markets; a welcome advantage these past 20 months. Based on this, and sales in the region of CHF 400 million for annual production of 150,000 units, it can be realistically valued at between CHF 800 million to CHF 1 billion.
“The right partner”
For months, speculation had been rife that Breitling was up for sale to encourage the Swiss superior Breitling replica watches. In fact it was common knowledge that an investment bank had been commissioned to look for a buyer, with a figure of 400 million then being quoted as a fair price for the family. Bloomberg News estimates the final deal, in which CVC Capital acquires an 80% stake, in excess of €800 million. Théodore Schneider keeps the remaining 20%. “I am convinced CVC is the right partner to elevate Breitling to the next level,” he said in a statement. “CVC’s expertise, track record and international network will help unlock Breitling’s full potential.” The transaction should close in June, pending approval by the competition authorities. Breitling should indeed benefit from its new owner’s network while keeping the same management, but without the synergies that an acquisition would normally bring. The question remains whether Breitling will ultimately fall into the hands of one of the sector’s multinationals. Investment funds aren’t in the business of nurturing family firms but rather buying and selling for a profit. Chances are that Breitling hasn’t found its new “forever home”.