Mergers & Acquisitions in the Art Market
At auction houses, you can buy and sell items for millions of dollars, and although they are a marketplace for high-value transactions, auction houses themselves are seldom part of mergers & acquisitions activities. That said, it is worth noting that two of the largest auction houses (Sotheby’s and Bonhams) have recently been sold, and there have been other transactions in this space as well. Before we analyse the most recent mergers and acquisitions in the art and auction industry, let’s take a quick look at the industry dynamics.
Art Industry Overview
Sales in the global art market were estimated at $65.1bn in 2021, up by 29% from 2020. The auction sector showed the strongest year-on-year advance with auction sales increasing 47%. Sotheby’s is the largest art and auction house, with a global market share of 11.2%, followed by Christie’s with 10.9%. Behind the top two is a large gap, the third, fourth, and fifth largest auction houses—Poly, Heritage, and Phillips—account for just 2.8%, 2.2%, and 1.8% of the global market share. Below that level—Bonhams being an exception—the art and auction houses tend to be very small and regional, and therefore have no meaningful global market share. This becomes clear when one considers that there are approx. 300k businesses operating in this market. In such a fragmented industry, one might expect a lot of M&A activity; however, the art market has been focused on either the very large firms or on technology-driven, new market entrants.
Sotheby’s – Acquirer and Acquisition Target
Until recently, Sotheby’s has been by far the most active art company in terms of mergers & acquisitions. In 2016, they first acquired Art Agency Partners—a recently established high-end art advisory business—for $85m. Then, they acquired forensic lab in a bid to identify art fraud, and later that same year they bought the Mei Moses Art index. The acquisition activities continued in 2018, when Sotheby’s first acquired Thread genius—an AI-based visual curation start-up—followed by the mid-market interior design company Viyet to support the launch of Sotheby’s Home, a luxury design marketplace. Out of these five acquisitions, only the acquisition of Art Agency Partners seems to have had any meaningful impact on the wider firm.
So far, the biggest acquisition in the art industry was the acquisition of Sotheby’s itself by BidFair USA, announced on June 17, 2019. BidFair—an entity wholly owned by media and telecom entrepreneur Patrick Drahi—paid $57.00 in cash per share of Sotheby’s common stock in a transaction with an enterprise value of $3.7 billion. The offer price represented a premium of 61% to Sotheby’s closing price on June 14, 2019, and a 56.3% premium to the company’s 30 trading-day volume-weighted average share price. The price that was paid represented a valuation of 18.3x EBITDA and certainly reflected the value of a strong and globally recognised brand.
Mergers & Acquisitions at Christie’s
Christie’s—which is privately owned by the holding company of Francois Pinault—was bought by Pinault in 1998 for $1.2bn. Although Christie’s and Sotheby’s are very similar companies in terms of business model and size, Christie’s has only done one acquisition under the ownership of Pinault. In 2015, it bought the collection management start-up Collectrium for an undisclosed amount. Although Christie’s was much less active in the last five years compared to Sotheby’s—one acquisition at Christie’s versus five acquisitions at Sotheby’s—it is worth noting that Christie’s used to be much more acquisitive. In 2007, Christie’s acquired Haunch of Venison, a contemporary art gallery with exhibition spaces in London, New York, and Berlin. The acquisition, an attempt to strengthen Christie’s foothold in the private sales market, lagged expectations and was closed in 2013. Prior to that, Christie’s made two further acquisitions in the nineties, acquiring Spink & Son—a London-based gallery—in 1993 and Great Estates in 1995. Great Estates—one of the largest networks of independent estate agents in the United States—formed the basis of what is now Christie’s International Real Estate.
Bonhams
Bonhams, previously one of the top five auction houses in the world, has lost market share over the last years. In 2018, private equity house Epiris bought it with the intention of bringing it back into the top five of the global art market. Prior to that transaction, Bonhams had global sales of circa £450m. Although it has a global market share of circa 1%, it is worth noting that Bonhams’ expertise is focused on specific segments of the markets that arein general, very narrow categories. The acquisition is unusual because Epiris is currently the only private equity firm with an active investment in the traditional fine art auction sector. Using the financial backing of Epiris, Bonhams has been active in their pursuit for acquisitions. In 2021 Bonhams announced the acquisition of The Market—a digital market place for classic car auctions—for an undisclosed consideration. The Market adds a new dimension to Bonhams’ already market leading motoring department. Digital channels account for nearly half of Bonhams’ business and the acquisition of The Market, increases this further.
Additionally, at the beginning of 2022, Bonhams acquired leading Nordic auctioneer Bukowskis - again for an undisclosed consideration. In addition to Bokowskis, Bonhams announced two further acquisitions in 2022: US auction house Skinner and the Danish auction house Bruun Rasmussen. With three acquisitions in three different countries within a very short period of time, it becomes clear that Bonhams is making quick progress on its journey to become a global regional auction house.
Gurr Johns
In addition to Bonhams, other art businesses have also been active on the M&A side in the most recent past. Gurr Johns, the London- and New York-based art advisory firm Gurr, bought London-based Forum Auctions at the end of 2021, having previously bought the UK auction houses Dreweatts and Bloomsbury in 2017.
Art, Technology, and M&A
Another private equity firm with a previous investment in the wider art and auction sector is TA Associates. On February 14, 2020, TA Associates announced the acquisition of Auction Technology Group from ECI Partners, and Proxibid from Primus Capital. Both ATG and Proxibid are first and foremost technology providers, with only some of their activities focusing on the art market. However, their auction platforms (which include the popular fine art and collectables auction websites thesaleroom.com and Lot-tissimo.com) are key service providers to a large number of smaller art auctioneers and collectors and are therefore, very relevant to the wider art market.
Auction Technology Group completed a successful IPO, listing on the London Stock Exchange on February 23rd 2021, valuing the firm at £600m. On June 17, 2021, Auction Technology Group—following on from the success of their IPO—announced the acquisition of LiveAuctioneers through the acquisition of their holding company Platinum Parent Inc. for an enterprise value of $525m. LiveAuctioneers is a popular destination in North America for fine and decorative arts, antiques and luxury goods auctions. The acquisition represents an entry to the US art market by the British company, opening the gates to American bidders.
The most notable merger in the pure art and technology space was the merger between Paddle8 and Auctionata. Both Paddle8 and Auctionata raised considerable funding from various investors: Paddle8 raised circa $88m and Auctionata circa $65m. However, despite significant funding, both firms struggled and decided to merge in September 2016. Unfortunately, the merger wasn’t very successful: just five months later, Auctionata declared insolvency. Paddle8 continued to operate but had to file for Chapter 11 in March 2020.
In addition to the Paddle8 and Auctionata merger the art technology scene saw an additional three acquisitions in the last two years. In October 2018, Barneby’s acquired Valuemystuff.com from its founder Patrick van der Vorst who had previously sold the business to Acutionata, but then bought it back when they went into administration. In December 2018, Walmart announced the acquisition of art.com “the world’s largest online retailer in the art and wall décor category”, according to Walmart. Another although smaller acquisition took place in March 2019, when blockchain backed art registry Artory bought Auction Club, a niche website that tracked results of other auction houses.
Conclusion
Although the art world loves to broker the sale of multi-million dollar artworks, the industry hasn’t been very active in terms of the mergers and acquisitions of its art and auction houses. This is surprising: on the one hand the market is very fragmented, but on the other hand there are several strong brands with scalable operations. This is therefore an industry in which mergers & acquisitions could create significant value.
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Dr. Daniel Baade
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Email: daniel.baade@dyerbaade.com
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About Dyer Baade & Company
Dyer Baade & Company (DBC) is an independent corporate finance boutique that specialises in Mergers & Acquisitions and related services. We are sector agnostic, but with a particular focus on Wealth Management, Independent Financial Advisers, Asset Management, FinTech, General Insurance, Trusts & Fiduciaries, Startups, and Art and Auction Houses. The firm advises Private Equity & Financial Investors, Trade Buyers & Strategic Investors, Entrepreneurs, and Business Owners. For more information, go to dyerbaade.com.