Published: December 18, 2019
By Greg Smith
The market was fast-paced and creative in 2019, slowing down for no one. We saw partnerships rise and others split, we saw buyouts, mergers, transformations, new locations and reinventions. We made new friends and colleagues and we lost old friends and colleagues.
Though, in particular, there was one area of industry that seemed to create the most action, and no — it was not a specific market or an individual item — it was the human side of this business: retirement. And that has created a moment of opportunity.
There exists an entire generation of pull-yourself-up-by-the-bootstraps auctioneers who began as dealers in the latter half of the Twentieth Century. Though they could never have dreamed, there were some that would go on to stamp their name on 20,000-plus-square-foot buildings. In the beginning, many of their stories are similar. They dealt privately before forming small auction houses with fewer than five employees and sold, sold, sold until their gavels broke. And then they sold some more.
The auction business is an absolute hustle. Not in the sense that they’re bilking people, but that they have 20 irons in the fire at any one time and their heads might as well revolve on a swivel. They become experts at judging a book by its cover, and part of that is a natural response to time management. They have no time to waste. They do not know what will walk in through that door for next month’s sale, but their business model relies on it. These are the conditions that up-start auctioneers begin in.
But the way they go out is dependent on contemporary business. Cue 2019 where we see firsthand how houses with revenues in the mid-eight figures are bought and sold, affording their founders a much-needed sigh of relief. Almost none of these transactions were the same.
We saw this in the merger of Wright and Rago, in the rebranding of Northeast Auctions into the partnership of Bourgeault-Horan, in the buyout at Clars, in the purchase of Cowans and Leslie Hindman by Hindman LLC.
At the lower level of the business, we saw a number of closures. The owners could entice none to take the reins.
Those who were a part of these shakeups had one thing in mind: competition and market share. There were, of course, other considerations, with economies of scale and efficiency often being mentioned. That latter reason comes with no reprieve to the folks who work at these houses and we have seen a vast amount of specialists shuffling around this year.
Antiques and The Arts Weekly spoke to some of the key players at these firms about why their case was unique, what they thought about the others and where they see the market headed in the future.
I will let you in on a secret: almost none of them believe the consolidations are over.
Announced in June and now led by CEO Richard Wright, this merger between two Twentieth Century design powerhouses was a match made in heaven. Chicago-based Wright, founded by Richard Wright, bills itself as the premier auction house specializing in modern and contemporary design, specifically “fine” or “high” design, but also fine art. Lambertville, N.J.-based Rago, founded by David Rago and led forward with help from partners Suzanne Perrault and Miriam Tucker, the latter not with the company any longer, found its strength in Twentieth Century design, pottery and bench-made craftsman furniture, particularly strong with New Hope artists and, before that, the early Arts and Crafts era. Rago maintains an estate department with a diverse lineup of sales, where Wright always featured a curated selection of fine art and design. In 2018, Rago generated $33 million in revenue while Wright put out $25 million.
Speaking to Antiques and The Arts Weekly shortly after their announcement, Rago said, “I’m tired of competing with [Richard]. We’re being offered the same stuff by the same people and let’s get together on it and bring it in.”
When asked what the real strength is, Rago said, “Relationships. If you’re buying modern, you know who we are and who Wright is. Certain people like to buy Nakashima from me and others from Wright. Now they’ll buy from both of us. We’re going to get more action on these pieces because of that shared client base.
“I was working with a consignor,” Rago continued, “And she was choosing between Richard and I. I called her up and told her we were merging and she said, ‘Thank god, now I don’t have to choose.’ It’s about getting to the point where the question comes down to: ‘why would you give that to someone else?’”
Rago said that by 2025, near his 70th birthday, he hopes to step back. “But that’s not happening right now,” he assured. Rago and Suzanne Perault serve as presidents of the new partnership.
Rago also spoke about economies of scale. The merger will allow the two businesses to combine departments and operate more leanly. He spoke of his specialists, his warehouse operations, his photography studio and his delivery and pick-up process.
The changing market also plays a role. “It’s to stay competitive,” Rago said. “Look at the reach of the bigger houses. The under-$25,000 market, they were never interested before. Now they’re having day sales selling lower-end stuff at $5,000. There’s almost no money in it for them. But for us, a $5,000 lot is a moneymaker. It puts pressure on us. The merger makes us more competitive.”
When talking about the advantages on his part for the deal, Rago said, “It’s certainly good for us. I’m not looking to make more money, I’m looking to have less stress. I’m a weird capitalist, I have enough. It’s not like I don’t want to work hard — I don’t want to stress hard.”
The merger will also have an effect on the house’s estimates. Competition breeds undercutting and zealous estimates that aren’t good for the market, and Rago says that the merger will allow the two houses to estimate more conservatively and ensure a better environment. “The average seller doesn’t understand that higher estimates stifle results,” he said. “The same thing on the other end, where a lower estimate is more likely to bring more money.”
Antiquarians & Associates
In January, auctioneer Ron Bourgeault, who ran Northeast Auctions for over three decades, announced the simultaneous closure of his longtime firm and the opening of Bourgeault-Horan Antiquarians & Associates, a partnership with James E. Horan Jr. The new firm held two sales this year in May and August, the later sale billed as the marquis auction.
Horan had worked with Bourgeault for 25 years and the new partnership placed the two on more equal footing. Horan had handled the business aspects of Northeast Auctions since 2005. The new company moved back to its original location in Hampton, N.H.
When asked what spurred the change, Bourgeault cited the cyclical nature of things and the changing market. He said, “The profit margin for auctions has been greatly reduced. Live auctions are not the events they were in the old days. It’s very competitive to get any material that brings good money today. And so much of what is available is selling for a fraction of what it used to sell for. It’s a challenge that we’re facing seriously.”
But Bourgeault understands the nature of the business and has been involved long enough to see the ebb and flow.
“I worked for an antiques dealer/auctioneer when I was in grade school,” Bourgeault told us. “He explained to me that there are cycles in the business. He had lived through the Depression when all a dealer could do to make money was to knock on doors to buy scrap gold to sell to the government. During World War II, gasoline was rationed and dealers were limited as to how much they could drive hunting for antiques. By the time I was 14, he told my mother he wouldn’t want his son going into the business because it was all over. During the early post-World War II years, he had gone to England. The country had been so devastated that everything was for sale. By 1960, the English economy was booming and his source was drying up. I learned from him that the business was evolutionary just as I have observed since.”
Bourgeault says that he is putting in as many hours now as he used to, but he hopes to slow down and cater to private sales. At the firm’s August sale, the auctioneer said he was surprised by how many retail customers were buying.
He explained he is looking to expand his private sales into all categories, bringing on his rolodex of specialty experts whenever necessary. “Old customers are still looking for some things and some old customers are looking to sell things,” he said.
Clars Auction Gallery
A private investor group acquired Oakland’s Clars Auction Gallery from owner Redge Martin in August. Rick Unruh, who is a part of that investor group, has assumed CEO and president of the auction house and the investors will serve as the board of directors. Unruh, now 55 years old, had served as vice president and director of fine art for Clars for the past several years.
Redge Martin joined Clars Auction Gallery in 1993 when it was owned by Harvey Clar, who had founded the firm in 1972. Martin bought the firm in 1996.
“I had never been to an auction, having a finance background, until I serendipitously took a job at Butterfield’s,” Martin wrote upon his retirement. “It was very rewarding to grow Clars Auction Gallery to 12 times the volume it had had when I started. This was during a time when the entire industry went through a seismic shift as the Internet and online bidding changed everything.”
When we spoke to Unruh, he reported that Clars would maintain a steady course. “The transition has been quite smooth,” he said, “in that we are maintaining the same staff, same location and same business model, for the near term.”
According to Unruh, the strength of any house is in its reputation. “The brand is the most important,” he said, adding, “There’s no real assets to an auction house.”
Unruh has his eyes set on being the predominant auction house in Northern California. “We want to see if we can expand down the entire West Coast. That’s the ideal plan. There’s plenty of property to go around,” he said. “When I was living in Connecticut and New York, there was an auction house every 20 miles. It’s pretty saturated. The West Coast is not like that, it’s a vast territory with few players.”
The indelible mark that Redge Martin and his peers, all long-time regional auctioneers, have left on the market is not lost on the new CEO. “The sweat equity — they built a brand and a franchise here. Of course [Martin] wants to see it carry on and that’s why he chose us.”
On the other shakeups, Unruh was equally sympathetic. “All these well-respected auction owners have one thing in common. They’ve been in the business for 25 years plus and have put their ‘heart and souls’ into their auction houses. They all deserve to retire! The deep relationships they have/had will undoubtedly carry on with the new guard of owners/auctioneers.”
Unruh says he hears from his finance friends that the art world is one of the last bastions of unregulated business. “You can make a lot of money in this business, that’s why you’re seeing hedge funds and private investment groups get into [it] because they know there’s money to be made,” he said.
But while everyone is moving, Unruh seems to have kept a level head in the market, focusing on expanding his share.
“The business itself, I believe, is still booming,” he said.
Wes Cowan was fairly straightforward when asked why this year saw an unprecedented level of change: “We’re all geezers. When you look at the auction business in general, it’s a baby boomer market. I have long thought that, for what we’re interested in — antiques and art — that this is a market that’s largely post-World War II. It accelerated with the boomers and really took off in the last 20 years as dealers in particular recognized that the auction business could be a good business to get into.”
Cowan’s Auctions, the firm Wes Cowan created in 1995 to serve the greater Cincinnati area, sold to Chicago-based Hindman LLC in January this year after posting $17.3 million in sales in 2018, a record for the company. The deal was backed by private equity interests.
Of his humble beginnings, Cowan wrote, “I was conducting auctions over the phone and through the mail from a makeshift office in my garage.”
Cowan told us frankly that he hadn’t sought to sell his auction house. Around 2015, he told his staff that he was on the 2020 retirement plan and he sought relief. “I gave my staff the opportunity to step up, saying here’s your opportunity, I sent a number of people to leadership development class.”
In the end, he said, no suitable replacement arose.
As regional auction houses partnered on the development of the bidding platform Bidsquare, Cowan developed a relationship with Leslie Hindman.
“Leslie and I talked about rolling up the middle market. But Leslie had an opportunity to sell the majority interest in her business almost two years ago and took it. When that same investor approached me last summer, I said ‘why not.’ It certainly makes a lot of strategic sense, we were the two big Midwestern companies.”
The buyout was advantageous for these two houses, whose established and money-maker departments were not in direct competition to each other. “I had things Hindman didn’t have — our American History, Firearms, American Indian departments — they didn’t have those. And Leslie has a much bigger footprint in fine art.”
Cowan’s agreement keeps him around for a few years, and he hopes he’ll step back to a distant role around 2022.
The decision also came down to market forces.
“In my mind, the real question is: what are any of us going to do in 15 years, ten years? What’s our business going to look like? Are we going to be selling GI Joes? I personally look at the traditional antique market and see some real interest, but it’s not like the good old heady days. I’m not as optimistic about the baby boomer collections that are going to come to sell. After they get coughed up in the next 15 years, what’s going to happen then? We had an all-staff meeting in Chicago in July where Cowan’s people…got together with Hindman people. I spoke to the assembled multitude of bright, shiny millennial faces and said, ‘I challenge you to look over the horizon and think about what the next markets are that we need to be into. Because you’re the future and you need to be thinking about that.’
“I do believe that there are opportunities to develop new markets. For the auction houses that get there first and establish a beach head, they will ultimately win in the next 15 years,” Cowan concluded.
The creation of Hindman LLC was unique in that it was both a sale and a merger, though it remains to be seen if Hindman will absorb Cowan’s into its own brand or leave it as is. The deal was structured in a way that formed a new umbrella company, Hindman LLC, which serves as the parent of both Cowan’s and Leslie Hindman Auctioneers. Leslie Hindman Auctioneers did $40 million in 2018.
Hindman LLC announced in January that it would be led forward by CEO Thomas Galbraith. Galbraith had already assumed leadership of Leslie Hindman Auctioneers back in June 2018 when Leslie Hindman sold a majority share in her eponymous firm to a private equity interest and announced her retirement.
When Galbraith came on, he had a reputation for being a digitally focused executive.
In an interview with artnet, Galbraith spoke about using technology to create smart growth: “We have lagged somewhat technologically speaking. Though Leslie Hindman and Wes Cowan were founding investors in [Bidsquare] and certainly understand the power of technology, its implementation had been a bit behind. The way we’re approaching changing our website and developing technology is to say, “How can we serve our clients in the way that they want to be served?” To do that, we need to make sure that any client that wants to interact with us in a physical retail or auction space can do so. Similarly, any client that wants to deal with us in the virtual sense should also be able to do so. Essentially, we want to cater to clients. With that in mind, we’re in the midst of deploying a new internal auction software platform that will help our team be more efficient, with information at their fingertips to be able more effectively communicate with our clients. We are also implementing a new website, with a new brand identity and a marketing strategy, to better serve our existing and potential clients.
Leslie Hindman continues on as co-chair of the board of Hindman LLC, but is not involved in the day to day operations.
Hindman LLC now has offices in ten cities across eight states.
Galbraith stepped down as CEO in mid-October in an extremely quiet departure from that business. The company did not issue a press release on Galbraith’s exit and it was not reported on. Hindman LLC would not comment further on Galbraith’s departure. And with as much announcement came in the new co-chairman and CEO Jay Krehbiel, who is also the managing director of KF Partners, LLC. Although not uncommon at the corporate level, Krehbiel seems to have no past professional experience in the auction business.
We reached out to Krehbiel to get his thoughts on the newly structured company.
“Together, we are able to bring each firm’s respective experience and reputation to the other’s clients,” he said, underlining the fact that both of these businesses are complimentary to one another. “And in turn, service those clients better. It was a very client-focused decision to merge.”
Krehbiel noted that while 2019 was a hotbed of action for mergers and acquisitions, the writing was on the wall. “The benefits of consolidation among the different regional auctions houses has been clear for some time. Many of these firms have been discussing combinations, mergers or sales for years in some cases. However, I don’t know what made it happen in 2019. I do know we haven’t seen the last of the consolidation.”
The CEO would not rule out future acquisitions, but said his thoughts are “equally, if not more focused on growing organically.”
Much ink has been devoted to the 2019 sale of Sotheby’s, which saw the publicly traded company creep back into the shadows of private ownership to the tune of $3.7 billion.
The company was sold to entrepreneur Patrick Drahi, a French-Israeli billionaire who founded the telecom giant Altice.
Per the terms of the deal, Sotheby’s shareholders each received $57 in cash for each share of Sotheby’s common stock, which was 61 percent higher than where shares were trading the day of the announcement. The total cash payout to stockholders sat around $2.58 billion, including $28 million for Tad Smith, the then-CEO.
Ninety-one percent of shareholders voted in favor of the sale.
Going from public to private meant that Sotheby’s could now compete on a more even-level with Christie’s without the encumbrances of shareholder reports and public filings, which ultimately affected consignments and the actual business of selling fine art.
At the time, Smith said the acquisition served to allow the company “to accelerate the successful program of growth initiatives of the past several years in a more flexible private environment.”
Smith was replaced four months later in October by Charles F. Stewart, who served as co-president and chief financial officer of Altice USA since 2016.
Sotheby’s CFO Mike Goss also made his way to the door, along with COO Adam Chinn. The new CFO is Jean-Luc Berrebi, the CEO of Drahi’s family office.
Some shuffles included John Cahill, who was reported leaving in October, but who is back as executive vice president and chief commercial officer. Ken Citron, also earlier reported as leaving, will be executive vice president of operations and chief transformation officer.
In December, we learned of more executives who are headed out the door: August Uribe, head of the department and vice chairman of the fine arts division in New York; Valentino Carlotti, executive vice president and global head of business development; Jon Auerbach, senior vice president; Jan Prasens, executive vice president and managing director of Europe and the Middle East; Jon Olsoff, worldwide general counsel; Jane Levine, chief global compliance counsel; and Karen Sutton, executive vice president.
We also learned that Drahi has internally reorganized the company into two divisions: “fine arts” and “luxury, art and objects.” The move came with the promotion of Amy Cappellazzo to head of global fine arts.
Other notable mentions in the 2019 market included relocations, new regional offices, as well as closures.
Garth’s moved into a new location at 589 West Nationwide Boulevard, Columbus, Ohio. The auction house is now housed within the historic Municipal Light Plant, a circa 1895 brick building that was the first power plant for the city of Columbus.
Santa Fe Art Auction found new digs at 932 Railfan Road, Santa Fe, N.M., inside the city’s newest arts district at the Baca Railyard. The auction house converted an existing 12,800-square-foot structure into a spacious new gallery.
Mooney’s Auction Service relocated to 10251 NY-32, Freehold, N.Y. The firm found a 7,500-square-foot facility to host their twice-monthly sales that include one discovery auction and one cataloged sale.
Freeman’s earlier this year announced the auction house is relocating from its 1808 Chestnut Street, Philadelphia, address, which the firm has occupied since 1924, to a new flagship location at 2400 Market Street. Following some delays, the firm plans to have its first sale at the new location in January.
Private dealership Olde Hope Antiques has opened a new location at 115 East 72nd Street, 1B, in New York City. Owners Patrick Bell and Ed Hild will also maintain their location in New Hope, Penn.
Moderne Gallery relocated to The Showrooms at 2220, located at 2220 East Allegheny Avenue in the Port Richmond section of Philadelphia. The new location boasts 4,500 square feet of exhibition space. Moderne celebrated their 35th anniversary this year.
Shapiro Auctions has relocated to Westchester County with a new gallery at 566 East Boston Post Road, Mamaroneck, N.Y. The firm will expand into estate offerings for the tri-state area and elsewhere.
Bonhams relocated its San Francisco office to a new downtown location at 601 California Street, Suite 150.
Skinner hung a shingle at 50 Main Street #1000, White Plains, N.Y. The new location is the firm’s Westchester Office and Katie Banser-Whittle, regional director, is available for in-office appointments as well as house calls in New York, Connecticut and New Jersey.
William J. Jenack Estate Appraisers & Auctioneers closed operations with the firm’s final sale on May 5. The auction house began in 1988 and served the Chester, N.Y., area.
Canton Barn Auctions, led by auctioneer Richard Wacht, closed its doors on July 27. Wacht is enjoying his much-deserved retirement.
Berman’s Auction Gallery of Dover, Del., held its final sale on August 28. The business had been running sales for 46 years.
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