Chanel takes a 25% ownership stake in MB&F

Why would they do that?

Aug 22, 2024

Always fun to wake up to some dramatic news in the watch world! Chanel and MB&F have announced a partnership that sees the French luxury maison taking a 25% stake in what most people think is a rather iconoclastic watchmaker.

Büsser remains the majority shareholder with 60%, and his partner Serge Kriknoff, holds the final 15%. The existing management team, including Charris Yadigaroglou (Head of Marketing Communications) and Thibault Verdonckt (Head of Sales), will continue to lead the company’s operations.

Frédéric Grangié, President of Chanel Watches & Fine Jewellery, emphasised the alignment of values between the two brands:

“We are delighted to sign a strategic partnership with MB&F who share the same values of independence, creativity and excellence.”

Büsser himself framed the decision in terms of securing the company's future:

“It was our responsibility, in today’s very favourable context and with our management team in its prime, to take this major step to ensure our long-term future – a natural evolution for a company celebrating its 20th anniversary next year.”

That’s funny; He describes today’s context as favourable. I’d imagine Max would have received a lot more money for his equity stake if he’d done this deal 2 years ago. In fact, a friend of mine recalls how adamant Max was at Dubai Watch Week 2021, that he would never sell. Again, the world looked a lot rosier back then, and perhaps the writing on the wall started to become clearer in recent quarters.

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A Pattern?

Most will already know, this partnership is not without precedent. In fact, it’s part of what we might describe as a trend; Where large luxury conglomerates take stakes in smaller watch brands. Chanel itself has actually been at the forefront of this movement:

Bell & Ross (1998): Chanel’s first foray into watchmaking investments.
Romain Gauthier (2011): Around ~20%* stake. (It is not ~50%, and it is surprising to see SJX irresponsibly implying this is the case1)
F.P. Journe (2018): Around ~20%* stake in one of the most revered independent watchmakers alive.

*Note: The Romain Gauthier and Journe equity % are approximate, and these figures have never been publicly disclosed.

Beyond Chanel, we’ve seen similar moves:

Hermès acquiring a 25% stake in Vaucher Manufacture Fleurier (2006).
Kering Group’s acquisition of Ulysse Nardin (2014). (They sold it btw)
Richard Mille selling a 10% stake to Audemars Piguet (2018).
De Bethune selling a majority stake to WatchBox (2021).

These partnerships usually allow independents to maintain their creative autonomy while gaining access to resources and expertise that can help them navigate the complexities of the modern luxury market.

The Logic of Symbiosis

From a business perspective, this Chanel / MB&F partnership makes sense on multiple levels. For MB&F, it provides financial stability and access to Chanel’s extensive network of suppliers and expertise in luxury marketing. This could potentially accelerate MB&F’s R&D cycles and allow them to bring more innovative creations to market faster.

For Chanel, the investment represents a strategic play in the ultra-high-end watch market. MB&F’s ~~insane~~ avantgarde designs and loyal collector base probably complement Chanel’s existing watchmaking portfolio, allowing them to continue selling nearly $500m worth of ‘mainstream watches’ a year whilst also participating in the upper echelons of high-end watchmaking via the likes of Journe, RG and MB&F.

Financially, while specific numbers aren’t public, we can make some educated guesses.

Andy Hoffman

reckons MB&F made 419 wristwatches and had revenue of 45.4 million Swiss francs ($53.3 million) in 2023. With Chanel’s backing, this could grow significantly over the next 5 years… potentially reaching $60-80 million annually if production increases modestly to accommodate new models, and average prices hold steady. Let’s not forget the M.A.D.1 money machine - with this capital injection, maybe we’ll see Max dropping fewer fidget spinners, but who knows. Maybe they will ramp that up too.

Edit: (About an hour after publication), MB&F just sent out this email:

Haha! They’re about to milk people once again. This pre-authorisation is more nefarious than it seems. Now that MB&F can pre-plan their production, I predict a huge production run, since the certainty of payments will allow for it - and they can simply announce more winners, without having people check the grey market prices before agreeing to ‘accept’ their raffle win and pay for the watch. If you have any sense, avoid! You will be able to pick this up at a discount in the secondary market.

That said, investments in creative enterprises are never without risk. The very independence that makes MB&F attractive could be threatened by corporate influence, no matter how well-intentioned. I’d say this risk is low, given what I know about Chanel’s reserved approach with Romain Gauthier and F. P. Journe. They tend to remain at arms length, and allow the creatives to deliver on their vision, with limited interference and extremely good support when the brand needs it.

Still, there’s always the danger that the pressure to increase production or broaden appeal could dilute the brand’s identity. Moreover, as readers of SDC will know, the ultra-luxury watch market is notoriously volatile and sensitive to economic fluctuations. If the market tanks further, Chanel could simply buy more equity for a lower price!

The Future of Independence

So what does this mean? On the one hand, it suggests that true financial independence is increasingly difficult to maintain as brands grow beyond a certain size. The costs of innovation, production, and global distribution in the luxury watch market appear to be formidable.

On the other hand, these partnerships, when structured thoughtfully, can provide a lifeline that allows creative independents to continue pushing the boundaries of horology without succumbing to market pressures. Chanel, as far as I can tell, seem to have found a niche which works for them - one in stark contrast with the approach of other conglomerates like Richemont or LVMH.

As this partnership unfolds, the key question will be whether MB&F maintains its rebellious spirit and creative vision while leveraging Chanel’s resources. If they succeed, Chanel will have successfully demonstrated (thrice!) that their template for helping independent watchmaking thrive in the 21st century is the correct approach: not in isolation, but as part of a larger, symbiotic ecosystem.

To be clear, the true test will be on the wrists of collectors. For now, existing MB&F owners will get a boost of confidence in the brand they love having more security in the medium to long term. But, will the next MB&F creation be as audacious, as unexpected, as amusingly perplexing as those that came before?

Lucky there’s another week until the next SDC Weekly, so if I think of anything else, I’ll follow up there! ✌