Bid/ask: French de­fense con­trac­tor DCNS reels in a $39 bil­lion con­tract for Aus­tralian sub­marines

Bloomberg Businessweek (North America) - - Con­tents - Katya Kaza­k­ina Edited by Pat Reg­nier

sale,” says Evan Beard, na­tional art ex­ec­u­tive at U.S. Trust.

The en­hanced ham­mer is only one tool the houses are us­ing. When Sotheby’s auc­tioned off the Twombly, it gave the seller, Los An­ge­les art pa­tron Au­drey Ir­mas, most of its $7.8 mil­lion buyer fee, say the peo­ple fa­mil­iar with the mat­ter, on top of the ham­mer price. It also made a risky agree­ment with the buyer, hedge fund man­ager Daniel Sund­heim: Ac­cord­ing to a fi­nan­cial fil­ing by Sotheby’s with New York state and peo­ple fa­mil­iar with the deal, the house let the col­lec­tor pay for the Twombly largely with an art swap. Sund­heim pledged to con­sign seven other works, in­clud­ing a Warhol and a Basquiat, with a com­bined es­ti­mated value of $50 mil­lion to $75 mil­lion. Sotheby’s guar­an­teed him min­i­mum prices for the pieces— a move that would leave the house on the hook if prices fall short. Sotheby’s, Sund­heim, and Ir­mas all de­clined to com­ment.

A new man­age­ment team at Sotheby’s, led by Chief Ex­ec­u­tive Of­fi­cer Tad Smith, seems less will­ing to trade prof­its for mar­ket share. In Fe­bru­ary he told an­a­lysts that the deal­mak­ing re­mains “fairly sig­nif­i­cant” for highly com­pet­i­tive col­lec­tions, but also that he’s see­ing signs of fewer give­backs on sin­gle con­sign­ments. The same goes for Christie’s. “We’re try­ing to re­cal­i­brate the mar­ket and per­suade the sell­ers to come to a more re­al­is­tic point of view,” says Brett Gorvy, global head of post­war and con­tem­po­rary art at the Lon­don-based house. “We be­lieve that if we work very hard and cre­ate value for the con­signor, we should be paid for it.”

Will col­lec­tors be will­ing to forgo deals that have been so lu­cra­tive? Thomas Danziger, a New York lawyer who ne­go­ti­ates auc­tion sales for ma­jor deal­ers, ad­vis­ers, and col­lec­tors, agrees the auc­tion houses want their old com­mis­sions back. But he says that may not be so easy, es­pe­cially when the art mar­ket is show­ing signs of cool­ing: “We’d ask for en­hanced ham­mer for any­thing.”

The bot­tom line The art mar­ket has been hot in re­cent years, but a price war has led auc­tion houses to give up some of their profit mar­gin.

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