Anatomy of a Sale: Behind the Scenes of a Brewery Buyout

November 16, 2014 John Holl

It starts with a very personal decision. It’s likely not an easy one, but when the time has come for a brewery owner or owners to sell the business they started or have managed, it sometimes means beginning the process to hand off the reigns to the next generation.

The conversations are quiet, private, and while passionate, they also reflect the realities of running a business. It’s almost the complete opposite of the sometimes-public outcry that comes when the deal is finally completed and customers learn a favorite brewery has a new owner. Not unlike the recent news of Anheuser-Busch InBev buying Oregon’s 10 Barrel Brewing.

“There are different factors that people have for wanting to sell,” says Ryan Lake, vice president at First Beverage Group, a financial firm that has assisted in many of the high-profile U.S. brewery sales over the past several months, including 10 Barrel and the sale of Boulevard Brewing Co. to Duvel Moortgat in 2013. “Maybe its age, maybe the job involves doing things you no longer like, or a desire to do something different. Or maybe it’s time to just start stepping back.”

When a sale is announced there is typically a lot of shock from the public, but in reality these deals have been in the works for months, if not longer. With so many factors to address, including employees, distribution, equipment, real estate, recipes and more, some have said the sales were almost as much of a challenge as opening in the first place, but still very necessary.

“Since I started Boulevard in 1989, the company’s long-term future has always been top of mind,” said Boulevard Brewing founder and president John McDonald when the sale to Duvel Moortgat was announced. “I wanted to find a way to take the business to the next level while retaining its essence, its people, its personality—all the characteristics that make our beer and our brewery so important to Kansas City and the Midwest. Duvel Moortgat’s commitment to quality and independence, and their proven record helping breweries fulfill their potential, made this a perfect fit and an easy decision.”

But how does an interested buyer get to a willing seller? “Some people have existing relationships or simply receive cold calls,” says Lake. Ken Grossman of Sierra Nevada has said publically that not a week goes by without someone calling him out of the blue with an offer to purchase his brewing empire. Grossman, along with several others, including Larry Bell of Michigan’s Bell’s Brewing Co., plan to pass the brewery onto their children, ensuring family ownership continues for another generation.

Still other breweries sell to their employees, giving workers a stake in the company they work for. Recently Harpoon Brewery, which operates large breweries in Massachusetts and Vermont, offered an Employee Stock Ownership Plan (ESOP) with its founder passing control to those who once worked for them.

Yet sales to a separate company remain most common. “Most of [the sellers] will decide to hire bankers, and we always recommend hiring someone. It’s an important decision, it’s not something that should be done alone, it’s the most important decision in the lifecycle of the business.”

With more than 3,100 breweries operating in the country, only a very few have made the decision to sell, including Goose Island Brewing Co. and Blue Point Brewing Co. to AB InBev. Alchemy and Science, a subsidiary of Boston Beer Co., makers of Samuel Adams, have purchased Coney Island and Angel City, two smaller breweries based in New York and Los Angeles, respectively. There are deals that see outside firms taking a large stake in breweries, like Ulysses Management LLC did with Southern Tier Brewing. That’s to say nothing of the smaller, partial-ownership deals that also exist between larger breweries and smaller ones.

Once the brewery has made its intention to sell known in the right channels, the suitors come a-calling. Then it’s up to the existing owners and their advisors to pick out the right buyer.

“The buyers’ market is robust,” says Lake. “There are financial buyers—people who don’t own brewers, and strategic buyers—who already own breweries, and more.”

For those passing off their companies there is an emotional component. Often they want to feel that the buyer is going to treat the business with the same care and respect they themselves poured into the venture.

“The industry is maturing and increasing competition is forcing brewers to adapt. I think a patient long-term partnership with people who appreciate the craft movement can play an important role in helping the brewery reach its full potential,” said Phin DeMink of Southern Tier when the Ulysees Management sale was announced. “Our relationship with Ulysses is exciting for Southern Tier because we now have the capital base to support our ambitious growth plans with major investments in people, process and infrastructure. The Ulysses team is immersed in craft culture and is committed to working with me to build a legacy we can be proud of.”

After a buyer has been chosen, there are a few more hurdles to jump because regulatory approvals and timetables vary greatly by state and can make the closing process somewhat less than straightforward. But, if approved, then titles are transferred, papers signed, and the proverbial keys are handed over in exchange for a check. For the brewers that sell their companies outright there is usually a non-compete clause worked into the deal, preventing the seller from taking the buyers’ money and opening up a new brewery venture. This is why a few that have sold and decided not to outright retire opened cider or distilling operations, but not a new brewery.

The sale is announced to the public. Most will opt for a traditional press release announcement, followed by a social media blitz. Others will release videos where the players explain their decision to sell. Typically, it’s handled in a professionally. Then come the consumer reactions that run the gamut from understanding and praise to downright vitriol.

The company, under new ownership, moves forward. The cycle of life for a business.

John Holl is the Editor of All About Beer Magazine.