Breweries are a fascinating investment option that many buyers are paying more than four times SDE to acquire. Due to this, it is an excellent time for brewery owners to sell. This review discusses how to value and sell your brewery for fair market value (or more). We also discuss the role your business broker should play throughout your sales journey.
About Breweries in The United States
Breweries produce beer commercially. There was a recent downturn in industry profitability, but the industry is expected to bounce back strong over the next five years. This is largely due to pent-up demand for a range of beer types. Although there are more than 10,000 breweries in the United States, the largest plays atop the industry dominate. However, this trend is expected to change as demand for regional breweries grows. Here are the statistics and projections for the brewery industry in the United States:
- There are approximately 10,500 breweries in the U.S.
- There was a -2.0% annual growth for breweries from 2018 to 2023
- Breweries generate $30.6 billion in annual revenue
- The annual profit for breweries is $1.3 billion
- Experts predict a sizable increase in annual growth (1.5%) from 2023 to 2028
How to Determine The Value of Your Brewery
Breweries receive excellent valuations relative to other industries. Your location may affect the quality of your valuation, along with other considerations such as your reputation, growth potential, unique competitive advantage, and the quality of your workforce. With that said, your seller’s discretionary earnings (SDE) are usually at the forefront of the discussion when it comes to fair market value. Rule of thumb data (also called acquisition multiples) also plays a role. The rule of thumb data for breweries in the U.S. is as follows:
- Breweries sold between 4.12 and 4.81 times the Seller’s Discretionary Earnings (SDE)
- Breweries sold between 6.27 and 9.96 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Breweries sold between 0.83 and 1.41 times the annual net sales
5 Steps to Sell Your Brewery in a Stress-Free Manner
The sales process varies for every brewery, which is why we strongly recommend a personalized strategy from an experienced business broker. However, there are common steps that can help you prepare, such as:
- Choose the right business broker and consultant
- Consider your brewery’s value (and plan accordingly)
- Find a qualified buyer in a confidential manner
- Monitor the due diligence process to ensure efficiency
- Close the sale and transfer ownership of the brewery
This is a tentative process that may not specifically (and entirely) apply for your brewery. Although you should schedule a consultation with a broker to learn more specifics, we have provided a general overview of each step below.
Step 1: Choose The Right Business Broker and Consultant
The quality of your business broker may affect your experience throughout the process and your ability to sell for fair market value (or higher) effectively. The broker should assist with every step, from determining the value of your brewery (with a market approach) to helping you close the sale. When choosing a business broker, we recommend finding one who offers experience with breweries (and similar business models). This ensures they are able to connect you with prospective buyers who have an interest in companies such as yours.
Step 2: Consider Your Brewery’s Value (and Plan Accordingly)
As has been already discussed at length, your valuation plays a crucial role in your strategy. Notably, it helps you (and your broker) determine the best time to sell your brewery. Keep in mind, it is not always best to go to the market right away. In some cases, it may be best to wait a month or more before marketing your brewery. Of course, your valuation also affects your initial asking price as well.
Additionally, in the stages right before you market your company, you will also prepare your financial and legal documents, including but not limited to your tax returns, cash flow statements, profit and loss (P&L) statements, balance sheets, insurance and lease policies (copies), and list of employees and vendors.
Step 3: Find a Qualified Buyer in a Confidential Manner
Your broker should use a structured and proven marketing strategy. There are two primary goals during the sale of a brewery. The first, of course, is to sell for the maximum amount while still ensuring your other exit strategy goals are met. Secondly, your broker will protect your confidentiality. Confidentiality means that the sale is done in a private and protected manner where news of your sale is not disclosed or leaked via public channels. Instead, your broker may utilize private connections and contacts they have established over the years, along with private databases and networks.
Throughout the process, your broker will also screen offers, negotiate on your behalf (along with your guidance and input), and discuss contingency plans with potential buyers. Once you settle on a buyer, the process ends with a signed letter of intent (LOI that establishes the purchase price and other terms that are included in the purchase agreement.
Step 4: Monitor The Due Diligence Process to Ensure Efficiency
Due diligence is a necessary stage in the sales process where the buyer has the opportunity to request documents, ask clarification questions, and possibly spend time around your brewery to learn more about daily operations. However, this process should remain structured. To ensure a thorough and efficient process, we recommend a due diligence timeline, which highlights each stage of the due diligence process with time guidelines for each.
Step 5: Close The Sale and Transfer Ownership of Your Brewery
The last steps are to close the sale and transfer ownership. You may need to prepare for closing and bring certain documents, which your attorney and broker can help you do. During closing, you can expect to:
- Review the purchase agreement
- Attain the final signatures of the agreement
- Notify employees that the sale is complete
- Update insurance and lease information
- Provide full access to your brewery
- Provide full access to online systems
Plan Your Exit Strategy With Sigma Mergers and Acquisitions
Are you considering selling your brewery? If so, then schedule a consultation with the experienced business brokers at Sigma Mergers and Acquisitions. We take great pride in helping our clients sell their stake in their company for fair market value. We understand the work you have poured into your brewery, and we are here to ensure all of the value you have built is noticed and accounted for during the sales process.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!