We just recently brought you the very first in a two-part series on ensuring bankable white wine market merger and acquisition deals, highlighting considerations from the buyer’s point of view.
With the marketplace for M&An offers remaining active, particularly so for strong-performing businesses, lots of winery and brand name owners are questioning whether now may be the correct time to sell.
While the factors behind selling a property like a winery or white wine brand name can be vast– and personal– the common theme in protecting a smooth and favorable deal is preparation. This second short article in our two-part series explores the transaction process from the seller’s point of view, including insight from industry experts.
To offer or not to sell
Choosing to offer your winery or brand name is among the most significant choices an owner will make. Owners reach the point of sale for a range of factors.
Perhaps you have a successful brand name and now is the correct time to monetize this instead of continuing to handle debt.
Or, a well-performing but small winery might find that succession preparation is going to be a concern and a sale will enable them to squander and move on. In other situations it might only be the owner who is aiming to leave the business and there is a buyer who wishes to preserve the operational structure.
Whatever your “why” might be, prior to even thinking about going to market, Pat DeLong, founder and principal of Azur Associates advises that it’s necessary you ask yourself the following two questions:
- Does my company have a long track record of repeatable and sustainable strong cash flows?
- Have I regularly bought my organization to ensure my staff and my assets (vineyard, winery, hospitality and other facilities) are existing, high quality and without substantial deferred maintenance?
“If the response to either of the questions above is no, you are most likely not in a position to start considering an M&A process and have years of work to do with your group, organization, and infrastructure,” continued DeLong. “When the response to both questions above is yes, dealing with M&A professionals who have experience with transactions to prepare for a sale increases your capability to attain favorable results.”
Assembling your team and financials
Once you have actually done the work to identify that a sale is the smartest choice for achieving your wanted result, the next step is preparing your monetary information and putting together a group of deal professionals to guide you through the intricate process.
To begin, David Von Stroh, managing director of FoodBevAg, recommends that essential gamers on your team include skilled M&A specialists, transaction lawyers, and an independent certified public accountant company.
These professionals are important in directing you through the process from start to finish, ensuring the deal is recorded properly with market terms, and that financial declarations are prepared precisely to resist any monetary irregularities a purchaser may reveal during their requirement due diligence.
“A company wanting to offer is considered as serious about transacting when the owners and management are prepared for a prospective sale,” said Von Stroh. “Preparing for a potential sale starts with ensuring the info shown a possible buyer is accurate, readily offered, and concise.”
A seller must also consider certain specialty specialists to recommend them. For example, DeLong cautions that a seller must understand the specifics of its winery entitlements today, as well as what might be possible in the future.
He notes, “Every purchaser is going to comprehend in terrific depth water availability and water rights, in addition to how production capability and hospitality entitlements are affected by present facilities and prospective expansion. In some deals these can end up being ‘gating’ items that determine the fate of whether a purchaser selects to continue with a deal or not.
Working with experts that comprehend how these entitlements deal with your residential or commercial property and within your county becomes part of the planning process that must happen well prior to deciding to go to market, as it might discover capital investment requirements to resolve any shortages.”
After the sale
So, you’ve prepared as much as possible, put together an excellent team, and ultimately secured a beneficial result for all celebrations in the transaction. Is the work now done?
Not rather. DeLong recommends that an often-overlooked component of many M&A deals is what takes place after the offer is completed. Incorporating professionals early while doing so that comprehend how to assimilate a new group and organization into your organization can have a product influence on the success of the deal yourself.
This can include work around wholesale and direct-to-consumer (DTC) path to market, as well as cultural integration and management structure, crucial to success and the appeal of the deal for the purchaser.
As the wine market is likely poised to continue to see an influx in M&A activity at all levels, buyers and sellers can both take actions to put themselves in favorable positions for attractive results.
Just, this comes down to advance preparation and having a group around you that comprehends today’s market conditions.