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transaction are in the best interest of potential ESOP participants and beneficiaries, the trustee should familiarize itself with the distillery history and its operations. In determining adequate consideration, a trustee may rely on the expert financial due diligence of an independent third-party if the trustee can demonstrate that:


It investigated qualifications.


It provided the expert with complete and accurate information.


It made certain that reliance on the expert’s advice was reasonably justified under the circumstances.



Nevertheless, if the trustee engages a conflicted entity, like the company’s accountant, to perform a valuation appraisal, the appointing fiduciary may be exposed to legal liability. In addition to directing its financial and legal advisors to perform diligence, it behooves a trustee to participate in regular communications with its advisors

to understand the industry context in which the artisan distillery operates, the state of distillery business, company risk factors, and potential areas of future company growth. One of the biggest areas to concentrate on are anti-assignment clauses and change-in-control provisions in craft distillery contracts. Most often found in employment agreements and supplier contracts, these can affect the viability of the ESOP transaction as well as the value of the company.

shareholders, and government regulators the happiest.


Marc E. Sorini is a partner in the law firm of McDermott Will & Emery LLP, based in the Firm’s Washington D.C. office. He leads the Firm’s Alcohol Regulatory & Distribution Group, where he concentrates his practice on regulatory and litigation issues faced by supplier-tier industry members. His practice for craft distillers includes distribution agreements, distribution counseling and litigation, spirits formulation, labeling, promotional compliance, compliance strategy, and federal and state tax and trade practice enforcement defense.

While an ESOP is not for everyone, it is a good fit for the craft distiller that wishes to keep ownership and management at a local level, while gradually sharing the growth and ownership of the distillery operation with its employees over time. A craft distillery that approaches an ESOP transaction with the same diligence and care that goes into producing a quality spirit—the same level of diligence and care necessary for approaching any craft distillery M&A transaction—has the best chance of making employees, selling

Emily Rickard is an associate in the law firm of McDermott Will & Emery LLP, based in the Firm’s Washington D.C. office. She focuses her practice on employee benefits matters generally, but has devoted a substantial portion of her practice to assisting employers in implementing and maintaining ESOPs. She has advised employers in connection with government audits with respect to ESOPs, and also with respect to litigation resulting from regulatory enforcement actions. Prior to joining McDermott Will & Emery, she spent a summer internship with the Plan Benefits Security Division of the Office of the Solicitor at the U.S. Department of Labor in Washington, DC.


Botanicals Workshop



Profile for Artisan Spirit Magazine

Artisan Spirit: Spring 2017  

The magazine for craft distillers and their fans.

Artisan Spirit: Spring 2017  

The magazine for craft distillers and their fans.