Evaluating Brewery/Breweries up for sale

[Zoob]

A few general questions when trying to evaluate the purchasing of a brewery/ brew pub that is operational in its current state.
Beyond looking at discounted cash flow and NPV or basic asset evaluation, what other factors should a prospective buyer evaluate or value in the total price or sale?

1.Would the buyer factor this lease terms into the final offer? My thought here is basically add up the remaining cost of property lease and use this as a part of a discounted gross value due to the fact that the seller would be absolved of the remaining terms of the lease?

2. One lingering question is does the buyer value/factor in the sweat equity that built up the brewery?

3. What if the build out was actually being valued by the seller at contract labor at retail rates/ prices Should this be discounted to a lower $$$ figure say sweat equity rate/history or do you not even value the physical labor that went in to the build out and just focus in on the total value of assets alone?

4. Also, with the discounted cash-flow analysis how can one arrive at a usable discount rate (no other local brewery sales, bond and stock market etc)

5. I have heard a few on this board say you pay nothing for good will, which in this instance is defined as branding(if you are not keeping the brand), clientele, and build out. What might the thoughts be now?

All help is greatly appreciated
thank you in advance
Zoob

[BeerBred]

This is some painful reading and reminds me why I chose the beer business and not a pencil pushing financial analyst job. Gary from TTB Helper would be best to answer your questions. Here are my thoughts on your Q's;

1. If he is selling, he is likely failing. Given that, this is an asset sale. Take his lease if you like the deal or you could try to renegotiate with the landlord.
2. Who cares how much he sweat. If he didn't know what he was doing or was poorly capitalized, he would have sweat a lot. The place is for sale, why?
3. See #1 and #2. What is it worth TO YOU?
4. You may not belong in the beer business, stick with Wall Street. It's for sale, why? 95% it's because they failed. Failure=asset sale.
5. Build out is not good will. If the place is leased, the build out now belongs to the landlord. If you are going to change the brands, there will be no good will. New brands=new customers. Be sure to eliminate and "stigma" from the prior brewery. I would be skeptical going into space that failed with someone else (having done that before) especially if it's a brewpub.

It sounds to me like you want to buy equipment that is already in place and start your own brewery. It may be just as easy but smarter to build out what is needed from the ground up in the right place. If the brands for sale were successful, they wouldn't be for sale and you wouldn't be scrapping them. This deal has asset sale written all over it. I just deleted two paragraphs of comments and questions on why you personally want to get in this business. It won't sound as I intend it.

I strongly suggest you find someone with beer industry experience. You seem to have the financial means and expertise, that's a small part of the formula. I personally happen to have a vetted plan and an incredible theme that will work almost anywhere. I don't have the part you have.

Feel free to reach out by email.
J

[Zoob]

Follow up

Beer Bred your mailbox is jammed packed as they say so I will post here

Hey there and thanks for the reply.
I guess to clarify some things. First thanks for the build out info, heck yeah the landlord wins all of that.

My financial skills are fair to good I assume, I do come to the table with about 3 years of commercial brewing experience, albeit mostly cellaring and kegging but I do have some large scale batches under my belt. Also with brewing I have more experience in the brewing part of the industry rather than marketing and sales figures. So perhaps I am balanced.

The brewery I am looking at definitely could use some help or streamlining on the hot side, and the cold side is pretty fair and usable. What I was really looking at is that the permitting and location have all been hammered out and the sellers books indicate that the business is profitable to this point, (ideally I would like a little more history but I am not going to get that).

My idea, if purchasing is that the time I would have to wait for permitting and build out could be replaced by an already up and running brewery which is bringing in cash flow rather than sitting 8 months and paying all the rent and such (money going out) some money can be coming in during re-branding period.


I agree this is looking more like an asset sale to me also. I just have to figure a way to make the current owner see this.

Again thanks for the input. Also who is the fellow over at XXTTB (sorry forgot the name) you are mentioning? What service is he providing?
thx
Zoob

[BeerBred]

Bad news. You need to get a new permit in your name. Gary. Ttb helper is his handle here. Email me. Lsbbrew@gmail.com.com

[Zoob]

Permitting

OK what I have read on the TTB site is for sales that if all the new owners paperwork is submitted with in 30 days of the sale the new owners will be permitted to continue to brew on the previous licence until such time the new owners paperwork is processed. In addition the old owner must submit that he is not in business anymore with the TTB during that 30 as well.

I sure hope I can find more clarity on this

Thanks again
Zoob

[BeerBred]

That could be. Lookup ttb helper on the web

[AnthonyB]

Another way to deal with this that I've heard about in the past is to sign an agreement with the previous owners stating that they will operate the business for a set time after the sale until all of the licenses can be transferred / changed over to you.

[Zoob]

TTB Helper not working

Hey BeerBred the email for Gary and his contact form within his website are not working (failing and bouncing)
Is the TTB Helper still opperational?
Zoob

[BeerBred]

636-209-1807