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Industry Views: Kering Group Purchase of Ulysse Nardin

The 1916 Company6 Min ReadAug 4 2014

The watch industry and collector communities were rocked by the Thursday, July 30 news that luxury conglomerate Kering Group had acquired 100 percent of watchmaker Ulysse Nardin. Kering’s move to secure a second major watchmaking maison – Girard Perregaux was the first – elevates the parent firm to a higher plane within the horology industry and advances the consolidation that has swept the sector since the late 1990s.

While UN’s loss of independence has unnerved many collectors, the near-term outlook is a positive one for both Kering and its new charge.

Although a deal had been rumored since the 2011 death of Ulysse Nardin patriarch Rolf Schnyder, whispers of a concrete proposal didn’t emerge until the spring of 2014. Kering Group, which derives most of its brand equity and revenues from apparel fashion labels such as Gucci and Puma, didn’t surface on the radar until the deal virtually was complete. Unarguably the luxury umbrella with the smallest stake in prestige horology, Kering gains a proven innovator in design and technology as well as economies of scale that will derive from the combined operations of Girard Perregaux and Ulysse Nardin.

Zoom InUN Marine ChronometerUN Marine Chronometer

For Ulysse Nardin, the deal must be viewed as a favorable development. Since Schnyder’s passing, the UN team that he built has continued to drive the innovation, product refinements, and brand development that defined Schnyder’s 18-years at the watchmaker’s helm. The 2012 introduction of the UN-118 manufacture movement – the firm’s first in mass production – and the 2013 release of an in-house chronograph secured the Le Locle maverick against the 2019 ETApocalypse movement cutoff. The moves also recapped UN’s commitment to in-house watchmaking at all price points. At the same time, innovative high horology developments including the Anchor Escapement, several automata watches, and new editions of the famed “Freak” avant garde watch prove that UN remains an active investor in complications and new technology.

Zoom InUN Maxi Marine Chronometer 18K Rose GoldUN Maxi Marine Chronometer 18K Rose Gold

And technology must be viewed as a primary driver of Kering’s interest in Ulysse Nardin. While silicon and synthetic diamond components have become fixations within the watch industry over the last half-decade, comparatively few companies (or corporate parents)  posses a proprietary production facility, intellectual property, or experience developing these compounds. UN, which has been working with silicon and synthetic diamond for over a decade through its Sigatec subsidiary, boasts all of these advantages.

Moreover, UN has taken the new developments mainstream with their use in the company’s volume Marine series. By purchasing UN, Kering gains instant access to a resource that  – for example – Rolex and Patek Philippe spent a decade developing.

Zoom InUN Maxi Marine Diver "Black Sea" ChronographUN Maxi Marine Diver “Black Sea” Chronograph

Ulysse Nardin wins because it gains a shelter from the periodic storms that batter the global luxury goods market. Despite the success of the firm in weathering the 2008-2010 global financial crunch, the period was a profound trauma for the industry. Many Swiss labels were driven by necessity into the arms of questionable saviors. The Chung Nam Group of China and Citizen watch of Japan were among many foreign buyers who walked away with Swiss properties despite a tenuous grasp of the histories and traditions bound therein.

UN decided to mortgage its independence on its own terms. In Kering, the watchmaker gains a corporate patron whose hands-off management of UN neighbor Girard Perregaux has yielded a period of innovation and rising industry stature for that firm. The ideal corporate umbrella for a small and dynamic firm is a partner that provides liquidity while permitting autonomy, and UN was able to observe this pattern at GP since its 2008-2011 acquisition by Kering.

Zoom InUN Maxi Marine DiverUN Maxi Marine Diver

For all of the engineering and design innovations he quarterbacked, Rolf Schnyder’s greatest feat at Ulysse Nardin may have been institutionalizing the mindset that produced these landmarks. The team Schnyder built remains intact and prolific. Patrik Hoffmann, UN brass since Schnyder personally hired him in 1999, remains at the wheel of the watchmaker as CEO. Having guided the company through periods of innovation in the early 2000s, survival during the late 2000s, and recovery ever since, Hoffmann ensures continuity in the C-suite. Chai Schnyder, Rolf’s widow and long-time wife, remains aboard as chairman to ensure that at least one principal retains a direct emotional stake in the firm’s direction.

Most importanty, Pierre Gygax remains as Head of Development and Chief Operating Officer. If Professor Ludwig Oechslin was UN’s watchmaking Einstein during the 90s and 00s, Gygax was J. Robert Oppenheimer. With UN since 1997, Gygax served as the program manager, application-developer, and practical engineer who translated Oechslin’s theories and blue-sky dreams into physical clockwork. Gygax was the motive power behind milestone products like the Freak, UN 160, and Sonata Silicium. While Oechslin’s metier was complications, Gygax has been the driving force behind UN’s innovations in high-tech materials. As the industry moves toward a future defined by of silicon, nitrides, and particle deposits, Gygax, not Oechslin, is UN’s best insurance policy against product wilt.

Zoom InUN Marine Chronometer "Manufacture" Limited EditionUN Marine Chronometer “Manufacture” Limited Edition

But Oechslin remains on good terms with UN. Now an independent watchmaker with his firm, “ochs und junior,” the old wizard remains a phone call away should his services be required.

Finally, UN will gain from the economies of scale that come with membership in a holding firm. While exact numbers are impossible to determine, a crude estimate of the combined Girard Perregaux/Ulysse Nardin output yields a watchmaker whose volume outstrips Audemars Piguet and Vacheron Contstantin while sitting roughly on par with Patek Philippe. The ability to pool resources will result in a tech bounty for GP and enhanced purchasing power for UN.

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Not every corporate acquisition devolves to a train wreck like Daimer-Chrysler or AOL-Time Warner. Kering has a solid track record with Girard Perregaux that bodes well for UN’s future. Sailing solo in the seas of modern luxury can be a dangerous game. Today’s independence can become tomorrow’s Chung Nam.

By retaining its proven performers, aligning with a parent that understands the luxury watch sector, and securing access to abundant capital, the nautically-themed watchmaker from Neuchâtel appears to have found a safe harbor.