London’s Daily Mail is reporting that the front runner to acquire international auction house Bonhams is Poly Culture, an auction house owned by the Chinese government, and a subsidiary of the Poly Group, whose interests range from property development to arms exports. The why of this acquisition may be known in the fullness of time, but for the moment, seems rather surprising as it would likewise prove surprising to find that Bonhams has been operating with any pronounced degree of profitability and, with its recent bricks and mortar expansion on Bond Street, without a fair bit of debt. Moreover, as is endemic with any auction house, its revenue and profitability must vary wildly, depending on consignments the acquisition of which is hard to predict or control, but yet a business whose substantial monthly overhead expenses carry on regardless of the quantity or quality of consigned items sold through its salesrooms. There has been a bit of ‘rationalizing’ over the last couple of years at Bonhams, with reductions in sales, and sales venues. Bonhams has not, however, been precisely leading the pack when it comes to online sales activity, behaving in this regard more like a regional salesroom, which with its single Knightsbridge location until its acquisition a decade and a half ago of the Bond Street and regional salesrooms of Phillips, it largely resembled.
Still, we do see a number of Chinese nationals participating in sales at Bonhams, certainly in the well attended Asian art sales in San Francisco. Interestingly, our experience has been that Chinese buyers will often pay more at auction than they will for comparable pieces offered for sale through the accredited trade. Presumably the Chinese buyers have divined that the auction house is a wholesale resource, and consequently, so the received wisdom goes, the best buys will necessarily be made there. That may once have been so, but in this age when online marketing makes all things transparent to both buyer and seller, everyone in the trade in art and antiques has to be price competitive.
But one other thing occurs to me, and this has to do with the nature of the Poly Group itself.
Few people will remember, although it was only a few years ago, that Butterfields, the old line San Francisco auction room acquired by Bonhams, was formerly owned by investor Bernie Osher, who used the salesroom not just as a profit center but as an adjunct to his own collecting interests. The best consignments, if they were pieces that were within his collecting ambit, were purchased by him by private treaty. It may be that that is part of the motivation of the Chinese government, the Poly Group’s alter ego, in an effort to flesh out Chinese institutional collections, and do it on the quiet.
Perhaps that’s a strategy that will pay off. Perhaps- but one wonders whether, with the ongoing operating expenses and debt servicing requirements of Bonhams, whether the Poly Group won’t find, at the end of the day, that they have paid a premium price, very far removed from a wholesale price, for acquisitions.