Posted tagged ‘exit strategy’

Day 582

April 12, 2013

The second-last day of lectures.

As usual, Mike Arnold started Brewery Management with a warm-up discussion: Cans versus bottles. Cans are lighter, and give the beer better protection from light. Bottles can have lower environmental taxes in Ontario (if they are refillable), are cheaper per unit, have labelling flexibility, and give expensive beers a higher pereceived value than cans. However, one possible issue with cans is the presence of BPA, an estrogen mimic, in the inner liner. At the moment in North America, contact with BPA is allowed for food products that are pH neutral or acidic, but not for foods that are alkaline. (Beer is acidic.) However, who knows if this will change, and if it does, how quickly that change will be made.

On to today’s main topic. You’ve started up a brewery, you’ve made some beer, and now, for whatever reason, you decide it’s time to get out of the game. What is your exit strategy?

The first step is to get a valuation of your company. The easiest (and most expensive) way is to get a professional evaluation. However, there are a number of cheaper ways of estimating how much your brewery is worth.

  • If your brewery is a publicly traded company, simply multiply the number of shares by their worth. If your company has 2.8 million shares worth $1.60 each, that would be a valuation of $4.4 million.
  • A useful rule of thumb is to simply multiply the last year of production by $200/hL. If you produce  22,500 hL per year, that would give a valuation of $200/hL x 22,5000 = $4.5 million
  • Another rule of thumb is to multiply your brewery’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) by 5. If your EBITDA was $3.7 million, your company would be worth  $18 million.
  • Another rule of thumb is simply to calculate 60% of your gross sales.
  • Or you can compare your brewery to other similar-sized breweries that have recently been sold.

Okay, you have an idea of what your brewery is worth. Now you need to find a buyer.

  • You can use a business broker–they exist for the express purpose of matching sellers to buyers, but they will charge a hefty commission.
  • Some real estate brokers are also taking on this role.
  • You may be able to find a buyer through your local trade association
  • You may be able to track down someone who isn’t interested in buying a brewery and then putting thir own name and brands into it, but rather wants to take over your operation as it is (including personnel, trademarks, recipes, etc.).
  • Your staff may be interested in buying you out and taking over operations
  • Or, if you can’t find a buyer, you may be forced to simply liquidate the operation.

So, let’s assume you’ve sold your brewery. Now what? (Assuming you’re not retiring to a Caribbean island with your  money.) If you’re still interested in brewing, you may not be able to re-enter the market immediately if you signed a non-compete agreement with whoever bought you out. Those usually last 3-4 years, and usually only apply to the marketplace your old brewery services; if you are interested in starting over an don’t want to wait, you could move to a new market and start fresh.

Or you could become a paid advisor–the consultant who arrives, solves a problem and then moves on.

Hmmm, is there any way of skipping right from school to the Caribbean retirement with scads of money?



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