Swatch Group Acquires Harry Winston

Swatch Group Acquires Harry Winston

Swatch Group Acquires Harry Winston   watch industry news

The Swatch Group and Harry Winston announced today, January 14th, 2013, that Swiss Swatch Group has acquired the entirety of the Harry Winston jewelry and timepiece division. That is all of Harry Winston except its diamond mining division which was not acquired by Swatch Group (nor sold as far as we know). Back in October Reuters announced that Harry Winston was searching for a buyer for its timepiece and jewelry division. Though popular, it was a widely known fact that Harry Winston was in a money losing position from a business perspective and was rumored to have been seeking a buyer for at least a little while.

Now only a few months later, a buyer has emerged. We'd say that it didn't take long for Harry Winston and the Swatch Group to begin acquisition negotiations and to reach a deal. According to the Swatch Group, the terms of the purchase include 100% of the United States shares of HW Holdings Inc. - parent company of Harry Winston Inc. While the Swatch Group now has control of all of the 535 worldwide Harry Winston employees, it is unclear what the future for those employees is. Logically the Swatch Group will incorporate much of Harry Winston in its own existing operations and install its own management, thereby making a lot of Harry Winston's existing employees redundant.

Swatch Group Acquires Harry Winston   watch industry news

This is the first time in quite some while that the Swatch Group has acquired a high profile jewelry and watch maker. According to the Swatch Group the purchase price for Harry Winston was the quite reasonable sum of $750 million, plus $250 million in debt. Together that more or less equates to a price of $1 billion for Harry Winston.

Around the turn of the century, Harry Winston was also in trouble. It was Max Busser (now of MB&F watches) that helped turn around its timepiece division. He also most well-known for the creation its "Opus" line of annual watches that are favorites among watch lovers. It is very much unclear what the future of the Opus collection will be with Harry Winston under Swatch Group ownership. It has been rumored that while excellent for press and branding, the Opus was either a money losing or barely profitable segment of the brand. Harry Winston's main timepiece collections are the Ocean and Midnight families. We suspect that the majority of the brands income was from diamond decorated women's models with more simple quartz movements.

Swatch Group Acquires Harry Winston   watch industry news

As a high-end watch maker Harry Winston will co-exist with other "Prestige" brands in the Swatch Group along side Breguet, Blancpain, Jaquet Droz, and Glashutte Original. Unless government regulators for some reason don't approve the purchase, we can expect Harry Winston to be officially under the Swatch Group umbrella soon.

6 comments
mrfreaz
mrfreaz

If the Swiss Government allows the beast of Swatch to continue gobbling up watch companies, then they will not be able to complain if Swatch's actions severely damage the watch industry. It has been widely predicted that Swatch's ever increasing share of the market will come at the great expense of the overall size and economic well-being of Swiss Watch Industry, and cause many companies to disappear. Since being allowed to consolidate and control most of the critical parts supply over the past three decades, Swatch has brazenly violated the trust placed in it. Once responsible for saving the Swiss Watch Industry, the founder's son now appears to be executing their ultimate plan to own it completely, (or at least what will be left of it)! They are now actively cutting off critical parts to competing companies that they wish to eliminate. Their stated intentions to foster diversity and innovation for the good of the industry do not ring true. Not every brand should have an in-house manufacture, this belongs mainly to very hi-end, exclusive brands. As Swatch well knows,  it has been a long-standing Swiss tradition to share manufacturing and development costs across many different companies. A single watch engine can then be further differentiated by the different companies' with distinct designs, complications and branding. Is this not also a contributor of diversity? In fact, Swatch themselves employ this strategy across many of their own brands, and have given no signs of scuttling it. With so many brand and choices, not only does the consumer get a lower price due to economies of scale and competition, but also a sense that the Swiss Watch industry is bigger than it really is. It should be the choice of a company whether or not to pursue this strategy, and not be arbitrarily dictated by the whim of another company with a degree of monopolistic control unprecedented in free countries. 


Swatch's stated intentions to continue to supply critical components to certain brands that are "Long Standing Partners," is likely only because they realize that if they were responsible for bringing about the demise of such iconic brands such as Rolex and Patek Philipe, they would surely be held accountable in the most severe way. It could result in what many in the industry have long been calling for: a government ordered divestiture of Swatch-controlled ETA and Nivarox. Oddly, the government's only intervention thus far has been to slow Swatch's plan down, to prevent complete disruption. So, if Swatch plays it right, it allows them to reshape the make up of the Swiss industry players according to their supreme wisdom. They will cut off the brands that they don't deem "worthy" (i.e. take over targets) and use this threat to acquire the ones they do. Brands of future interest to Swatch will be kept alive, until they can bought. When negotiating for these brands, Swatch will come to agreements with that brand's owners, (i.e. Richemont Group, LVHM, etc.) in order to consider them as "Long Standing Partners," thereby insuring a continued supply of necessary parts for other brands in the portfolio. Rolex's recent great investment, giving it the ability to produce its own critical parts like mainsprings, is a slap in the face to Swatch's thinly veiled benevolence towards these "worthy" brands. This should speak volumes. Unfortunately, not too many Brands are large enough to produce their own mainsprings and balances, and these smaller, but collectively important brand's interests are not being protected. Swatch's recent lawsuit with Tiffany and partnership meltdown, does not speak well of Swatch's ability to get along well with other companies, and gives reason for partners to be cautious when dealing with Swatch.


In order for the Swiss industry to grow and prosper, low and mid-priced brands must have access to the high quality, mass produced movements currently made by ETA. There is no point to every low and mid-priced brand replicating not only their own respective in house movement manufacture, but also the most fundamental, critical components such as mainsprings and balance wheels. Not to mention the requisite parts and service operation a manufacture movement requires. This would be vastly inefficient and prohibitively expensive. Which again, is the reason even Swatch's own lower and mid-priced brands share generic mass produced ETA movements. But apparently Swatch now feels that they should be the only ones allowed to take advantage of this, giving them an unfair advantage..


The growth and health of the Swiss Watch Industry requires a broad selection of price points, which was ironically best demonstrated by Swatch itself when they saved the entire industry in the eighties with the low end mass Swatch watch. Being a single generic watch, they leveraged it spectacularly by marketing it under literally thousands of iterations and styles. Swatch now seems to be against the concept of a single watch platform branded under many different styles and names. At any rate, they have changed course in restricting the free production of these cost-effective movements and critical parts, which will eliminate much of the moderately priced sector, allowing Swatch a virtual monopoly in this segment. With a limited range in moderately priced available Swiss mechanical watches, prices will increase, and the Swiss Watch Industry will become even smaller, rather than expanding. It is very sad what was once the savior of the Swiss Watch Industry could turn out ultimately to actually bring about its demise, all with the blessing of the government! However, this does not have to be a forgone conclusion. Mighty companies like Swatch often bring about their own downfall when getting too carried away with themselves. It should be blatantly apparent what Swatch's intentions are. If Swiss companies can not reply upon their Government protect them against partners that turn predatory, they will have to come together in the great Swiss tradition for survival. If they are able to replicate a common source for essential parts, they can compete mightily against Swatch. Since the balance of the industry still outnumbers Swatch, they may be ultimately able to surpass Swatch through superior economies of scale, and even outdo ETA's older technology by designing some more modern movements. In this way they may be able to use the spirit of co-operation that was once a proud part of Swatch, to isolate and keep Swatch in check. However, this will take time, but thankfully Swatch has been forced to keep supplies going on a decreasing basis until 2019. It will be interesting to see how this plays out and if Swatch's controversial decision ends up being a smart one!

Ryan B
Ryan B

I admired their individuality. sad

antjay
antjay

Another one bites the dust . Harry just fell off my lotto list .

SuperStrapper
SuperStrapper

While I don't like the fact that Swatch has gobbled up another brand I really liked, I will say that this is a fate more desireable than seeing HW and Opus simply go out of business alltogether. New Opus releases are what this interest is all about, right?

Ulysses31
Ulysses31

I can't help but cringe a little whenever I hear of another independent brand being swallowed up by a commercial behemoth.  I wish them luck, because I get the distinct impression they'll need it.

nateb123
nateb123

Given what I know about what Swatch Group management is like, it just got a whole hell of a lot less enjoyable to work at Harry Winston.

Trackbacks