Sotheby’s pays up to $85m for art consultancy firm
STILL UNCLEAR HOW SMALL, INDEPENDENT SHOP WILL MARRY OPERATIONS WITH BEHEMOTH
In a highly unorthodox move bound to shake up the auction world, Sotheby’s is paying up to $85 million (Dh312 million) for a boutique art advisory business run partly by a former executive at its archrival, Christie’s.
The firm, Art Agency, Partners, will lead a new fine-art division within the auction house, focused mainly on 20th- and 21st-century art. By acquiring the group, effective on Monday, Sotheby’s hopes to increase profits, build private sales and expand its client base at a time when the company’s stock price has been steadily declining.
“It’s going to bring significant new profit and revenue streams to us, and it will deepen our bench considerably in terms of the high end of the fine-art market, private sales and overall deal-making,” said Tad Smith, 50, Sotheby’s new president and chief executive, in an interview. “It also brings significant new talent and leadership into the organisation.”
Financial commitment
Sotheby’s financial commitment to the group — which includes $50 million in cash, as well as additional payments of up to $35 million if undisclosed financial targets are reached over the next five years — is roughly the cost of a blue-chip Rothko painting. But it may raise some eyebrows, given that Sotheby’s just went through a round of buyouts that decreased its staff by about 80 people, which the company expected would result in a fourth-quarter charge of about $40 million.
This move also comes on the heels of the largest guarantee in auction history paid for a single collection, $515 million, to the family of A. Alfred Taubman. (Guarantees are pledges by the house to the seller that it will cover a minimum price.)
Various sales of the Taubman collection have so far totalled about $438 million, leaving a shortfall of about $77 million. A sale of works by old masters, on January 27, might realise $21 million to $30 million. Still unclear is how a small, independent shop like Art Agency, Partners — founded just under two years ago — will marry its entrepreneurial operations with an established behemoth like Sotheby’s, oldest company listed on New York Stock Exchange.
The acquisition, which came together over the last few months, is part of a larger strategy by Smith to improve the company’s position at the high end of the Modern and contemporary art market. That strategy includes bolstering private sales capability and finding new opportunities for growth in advisory services. The acquisition came one month after Sotheby’s hired Marc Porter, a 25-year auction veteran, from Christie’s.
Art Agency, Partners is managed by Amy Cappellazzo, 48, the the the high-profile former chairwoman of Christie’s postwar and contemporary-art development; Allan Schwartzman, 57, a longtime art adviser; and Adam Chinn, 54, a co-founder of the investment bank Centerview Partners and a former partner at the law firm Wachtell, Lipton, Rosen & Katz.
Growing pains
“Collectors’ expectations have gone up significantly across the board,” said David Schick, a managing director at Stifel Financial, who tracks Sotheby’s. “They want a holistic and full set of services and advice. A big portion of this transaction relates to what the customer really needs.”
Still, there are bound to be some growing pains; some longtime Sotheby’s specialists will now have to report to the Art Agency executives. And those executives will now report to Smith and be compensated as Sotheby’s employees.
“I haven’t been an employee since 1983,” said Schwartzman, who has been a curator but has never worked for an auction house. And while Cappellazzo had not expected to return to the auction business, she said, “It’s a different moment in the marketplace, a different task at hand.”
The fine-art division will initially incorporate Sotheby’s Impressionist, Modern and contemporary art departments and eventually encompass other categories of the period, including American, Latin American and Modern and postwar British art.
Cappellazzo and Schwartzman will oversee specialists in those areas, private sales and the development of a retainer-based advisory business within Sotheby’s. They bring with them a staff of 15. Chinn will assume the role of executive vice-president for worldwide transaction support, succeeding Mitchell Zuckerman, who is retiring.