Selling a wine business? Here’s what you need to know
The situation happens so often these days that it’s become a cliché – the Baby Boomer vineyard owner who knows it’s time to retire but has decided to sell rather than leave the business to family. But what comes next?
“If you don’t get this right, the process will fall apart quickly,” says Jamie Watson, a partner at GVM Law in Napa and certified in estate planning. “Because there is a process, and you have to learn to trust the process.”
“The process” is as much about debunking myths as it is about practicalities. That’s because it’s often hard for a homeowner to understand that all the blood, toil, tears, and sweat won’t necessarily mean a higher selling price. Or that countless buyers, with pockets full of cash, line up to make an offer.
Rather, it is about understanding that selling a winery is not that different from selling any other type of business. sweatpants.
In this, selling a wine estate is a commercial operation, neither more nor less, explains Patrick Fallon, COO and managing director of the consulting firm CSG Partners in New York: “There are generic problems which are not specific to wine, and it doesn’t matter if you started the business from scratch or inherited it; and it doesn’t matter whether you’re walking through the vineyards or crafting gadgets.
And that means all sorts of tasks that may seem boring, frivolous and even bewildering, but are necessary to ensure that everything satisfies buyers, as well as your suppliers and employees. Think of it like selling a house, but infinitely more complicated and frustrating, and something that can take a lot longer.
As such, this includes – but is not necessarily limited to – six key areas (as well as if the winery is bought by a multi-billion dollar multinational, which is a whole different story):
• Set a price and find a buyer. Watson, who went through this process as both a lawyer and a family member, says hiring professionals to do both is crucial. “You have to know where you stand,” he says, “and it’s often hard to get away with someone who knows the process and knows who’s willing to pay top dollar.” Yes, he acknowledges, it can be expensive, but the alternative is to do it yourself. And you really want to do that? (No.)
• Open the books. This means full disclosure, not only of winery finances, but also of supplier and wholesaler agreements, intellectual property and trademarks, wine blends and formulas, estate vineyard conditions and contracts. employees. That, says Watson, can be a stumbling block for winery owners who have long kept some of that secret, like a proprietary blend, or have handshake deals with suppliers and winemakers.
• Take care of the essentials. This includes the various corporate governance issues that might have been overlooked (did the board meetings actually take place? Were the officers actually elected?), as well as the various local, state and federal cellar. What happens when the domain is sold? Who is responsible for transferring them to the new owner? And, just like a home sale, it can include repairs to equipment and buildings. Who wants to buy a tractor that won’t start?
• What type of sale? This can be extremely complex, and not just because state laws may differ. Is the potential buyer public or private? Will it be a transfer of shares or assets? The list can go on and on, and each scenario has specific requirements, plus pros and cons. According to Lauren A. Galbraith, an attorney with the San Francisco firm Farella Braun + Martel who works with families and businesses that need estate planning, there are ways to organize the sale to benefit the heirs and reduce the taxes. But no one size necessarily fits all.
• Because, of course, taxes. Not just ownership, but property taxes and other state and federal levies (which can also vary depending on the location of the winery). This is one of the many reasons, says Galbraith, that planning for the sale must take place long before the planning for the sale. The last thing you want, she says, is a forced sale after death and its tax disadvantages.
• Think about your employees. Is part of the value of the winery due to a top sales manager, top vineyard manager, or top winemaker? What happens to the sale price if they want to leave rather than work for the new owners? They will need to be consulted at some point in the process, something else, says Watson, which is often difficult for some owners to understand.
READ ALSO: Succeeding in family wine business succession planning
Jeff Siegel is an award-winning wine writer, as well as the co-founder and former president of Drink Local Wine, the first locavore wine movement. He has taught wine, beer, spirits and beverage management at El Centro College and Le Cordon Bleu in Dallas. He wrote seven books, includingThe Wine Curmudgeon’s Guide to Cheap Wine.”
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