Private Equity:
“Traditional private equity is a bank or a private equity firm that makes investments on behalf of their investors,” said Kopman. “They are playing with other people’s money. They want to make investments but they have a very strict exit strategy that is governed by their structure.”
Kopman said that private equity buyers “generally want to see a substantial return on their investment.”
“They are trying to make sure that the company looks really good for the next person that is going to buy it,” said Jordan.
Family Offices:
“There is a subtle but important difference between a PE firm and a family office,” said Shireman. “They are highly interested in the management team. There will be a second transaction down the road, but it is their own money. They are not beholden to a fund or a certain timeline, so they are much more patient.”
Jordan noted that while a transaction timeline for private equity buyers might be 3-5 years, family offices typically look at longer-term investments of 10-15 years.
“If they are patient and are willing to wait a long time or it is a vanity project still, they are going to want something, which tends to be cash flow,” said Jordan. “They are going to expect that there is some kind of dividend in the process.”
Initial Public Offerings (IPO):
“They are expensive and there is a lot of market oversight to say ‘how are you performing,’” said Jordan. “While all of these outside structures want the company to be healthy, I think there are a lot of things we do that are above and beyond healthy. Some of that gets a little bit of the squeeze.”
Kopman also weighed in on just how expensive an IPO is.
“You are looking at about $500,000 a year in compliance costs,” he said.
Strategic Buyers:
“These are people that are in the industry and see that adding your company, to their portfolio, will have some strategic benefit from them,” said Jordan. “You will get some synergistic benefits in that maybe you don’t have to invest in more capacity and you can brew in their plants.”
Shireman elaborated, explaining how First Beverage Group breaks down synergistic buyers into three groups.
“There are the large brewers that you think of: A-B, MillerCoors, Heineken,” he said. “And then there are some very esoteric, European buyers such as Duvel and then a synergistic buyer could also be another craft.”
One disadvantage, Shireman said, could be maintaining the legacy of a brewery after selling to a strategic.
“I think we will see a lot more small mergers and acquisitions over the next 10 years as people look at trying to grow their companies and how they want to exit their companies,” said Jordan.
Management Buyout:
“A management buyout is simply where the management of a company would get financing for some sort of buyout,” said Kopman. “Essentially the management of the company is going to acquire the capital necessary to buyout the majority owner.”
That capital will likely come in the form of bank debt, Jordan said.
“You are essentially using free cash flow, in the company, to fund that,” said Jordan. “Managers get that money from the bank.”
And for a management buyout to make the most sense, a brewery should have “some pretty aggressive growth plans,” Kopman added.
Employee Stock Ownership Program (ESOP):
“It is a plans that is very highly regulated, in large measure because it is a tax preferred status,” said Jordan. “If you are 100 percent ESOP, you no longer pay federal, corporate taxes.”
The “taxable event” happens when employees look take money out of their ESOP trust, Jordan said.
“They do cost money to administer,” she said, suggesting that an outside trustee handle those transactions. “You don’t want there to be any confusion about who is watching out for the best interest of all of the people who are inside of that trust.”