LiveAuctioneers LLC is a leading auction technology and real-time online auction marketplace for fine and decorative art, antiques, jewelry and vintage collectibles.
Harris Williams recently advised LiveAuctioneers on its controlling investment by Cove Hill Partners. Here, Technology, Media & Telecom Group Managing Director Mike Wilkins, Director Erik Szyndlar and Vice President Brian Titterington share their insights on what made LiveAuctioneers an exceptional investment opportunity, as well as their advice for other buyers and investors interested in the space.
1. What makes this an appealing space for buyers and investors?
Wilkins: “The traditional auction industry is undergoing significant change. The segment is largely comprised of family-owned businesses with an audience reach limited to a local geography. Now, online marketplaces like LiveAuctioneers’ platform are expanding the reach of regional auction houses to be global in scale. It’s a rapid change to a massive industry, when measured by the gross merchandise value that flows through auction houses.”
Szyndlar: “These marketplaces enable the auction houses to be more efficient, more profitable and to reach a broader universe of potential buyers. Additionally, they enable bidders to more easily find items of interest, set alerts for items and remotely participate in auctions from a large array of auction houses. All of that removes friction from the buying experience and boosts revenue for the auction industry.”
Wilkins: “The business model is also cycle-resistant and benefits from software-as-a-service (SaaS) profitability margins. While there may be price compression on goods in down economies, volumes also tend to increase as sellers seek to offload more items. Supply of merchandise is often a challenge, and online auction marketplaces unlock a significant supply channel.”
2. What made LiveAuctioneers particularly appealing to its investor?
Szyndlar: “LiveAuctioneers excels in the experience it creates for bidders. As its name suggests, it allows true, live engagement, which is very different than what platforms like eBay provide. The way items are photographed and described is highly curated and professional. That’s important, because remote bidders are competing against those physically at the auction. Remote bidders need to have an online experience that is as close as possible to what they would experience if they were there in person; they need to engage with the item in a way that will motivate them to want to win the auction. That bidder experience requires highly scalable and reliable technology, which happens to be a key differentiator of LiveAuctioneers’ platform.”
Titterington: “LiveAuctioneers’ tenure in the market was also appealing to its investors. Over time, the company established a large and engaged user base on both the buyer and seller sides. That is very difficult to recreate. It’s also difficult to build the trust that comes along with that tenure. In addition, the company leverages data and analytics very effectively, which contributes to its profitability and to its customer engagement.”
Wilkins: “Investors were also attracted to LiveAuctioneers’ potential for platform expansion. There are many pain points involved in acquiring an item in an auction. LiveAuctioneers can expand its marketplace platform in areas such as insurance, payment clearing and processing, or vertically integrating the shipping, packing and handling, all of which help auction houses increase efficiency and improve the e-commerce experience for bidders.”
3. What advice do you have for other buyers and investors interested in the space?
Wilkins: “Investors often ask us about finding e-commerce platform opportunities in an ‘Amazon world.’ I tell them that when a market is going through significant change, they should look for the few parties that are on the forefront of that change. Once the floodgates open, there's no shortage of lift the market will get. Also, once a platform is in place, there are many ways to expand the services offered to buyers and sellers and create new revenue streams. Those are great opportunities.”
Titterington: “How do you compete with the big incumbents in online marketplaces such as eBay and Amazon? By being a category leader in a niche. This niche happens to be auctions focused on art and collectibles, but there are others. Many investors will find it appealing to be the absolute dominant category leader and largest player in a small or mid-sized market. In short, they’re not trying to out-Amazon Amazon.”
Published July 2019