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EXIT STRATEGIES
istilling may be your dream, but it may not be your whole life. After running a distillery for several years, the owner or partners of the business may be ready to start a new chapter. If a distillery has been operating for a while, one would hope that the business has reached profitability and is successful in the eyes of the owners and employees. In MERGERS some instances distilleries have grown A merger is not the most common so successful that the type of distillery sale, but they do hapbusiness is viewed as pen. In the case of a merger two similar a competitor to larger businesses combine forces to become brands. Competing one company. The two companies may with big brands can continue to outwardly appear as two lead to the opportuniseparate businesses but share resources. ty for your business or In a successful merger the two compabrand to be acquired nies can share sales dollars, marketing by another company. resources, larger economies of scale, An acquisition can and human resources. A merger can allow the distillery to considerably lower the overall cost of make a big leap fordoing business for two companies that ward in growth. operate similar businesses. Although some people start distilleries with ACQUISITIONS the intent for the business An acquisition is when either to become a legacy, there controlling interest or complete are times when a legacy ownership of a business is bought is not the best long term by a larger company. After an acchoice. When the opportuniquisition the business can go in ty knocks on your door to sell many directions. Most often for big bucks, many people will the distillery being acquired open the door and invite the opcontinues to operate with portunity in. Let's take a look at guidance and resources some of the ways a distillery can be from the new parent sold, then cover a few real world accompany. quisitions and how they came about.
When it's time to hang up your hydrometer... WRITTEN BY KRIS BOHM
FOR CRAFT DISTILLERS
W W W . ARTISANSPIRITMAG . C O M
LIQUIDATION The choice to sell a distillery through liquidation can occur for many reasons, but what is guaranteed is that it will see a much lower sale price than an acquisition. It is risky business to start a distillery and they do not always go as planned. In a liquidation the distillery assets are sold. This means the sale of all distilling equipment and inventory of spirits, and sometimes the distillery’s brand as well. The bright side of a distillery liquidation is that there is strong demand for used equipment in the market right now. This means that used equipment can sometimes be sold for more than the original cost to purchase it. This can potentially allow the owners who are selling a distillery to recoup some of their losses via equipment liquidation.
BUSINESS VALUATION Now that we have covered the three common ways distilleries are sold, let’s determine the value of a business. For a distillery to be acquired it must first be valued. Valuing a business involves assessing various factors to determine its worth. There are quite a few different methods on how to determine the value of a business. One of the most appealing methods of distillery valuation is using case sales. Case sales can be viewed as a measure of health and potential revenue of the business. A multiplier is applied to annual case sales that determines how much 107