Case Study Winery

Profile

Commercial winery with an attractive, high traffic retail operation and a small vineyard in the

heart of Paso Robles wine country.

Situation

The majority of the owner’s personal wealth was tied up in the winery. He was in his late 60’s and ready to retire. He was “burned out” and spent more time at his second home than at the winery.

The owner had previously listed his business with a real estate broker as an open listing, but it had fallen out of escrow due to a variety of buyer and seller issues.

The business was profitable for the owner but real estate prices had escalated so much over the last several years that it had become a challenge to justify selling the business assets in addition to the value of the real estate.

Issues

The business was profitable, but it was not where it needed to be to justify the premium desired by the owner.

Over the years the winery won many awards including double gold medals. However in order to improve profits the owner had started buying grapes from outside the appellation area. This move was criticized by local winemakers and had created a negative buzz regarding the quality of the wine.

Although the retail section of the winery was attractive and the area around the parking lot was beautifully landscaped, other portions of the land, facilities and equipment needed maintenance.

There were facility, land use and various permit issues that needed to be resolved.

Solution

Over several months Henberger advisors worked with the owner to put in place a value

enhancement exit plan. The main goals of this plan were:

To relieve the owner of every day responsibilities.

To enhance the value of the busines by:

- Focusing on improving retail sales and better financial management utilizing financial

benchmarking tools.

- Resolving the land related issues.

- Implementing a facilities improvement program.

To identify a buyer willing to pay a premium for the business and the property.

Implementation

A team of top professionals was assembled to address all exit planning needs.

A general manager was appointed to run the day-to-day operations and focus on improving the financial performance of the business.

A marketing plan was implemented focused on increasing retail sales.

Under the owner/winemaker’s watchful eye a winemaker/consultant was hired and grapes were once again purchased locally.

A substantial investment was made in facilities and property maintenance upgrades.

A consultant was hired to address the permit and land use issues and coordinate with local government agencies as needed.

An ALTA Survey was ordered to resolve any unanswered questions and protect the owner from any future liabilities.

Results

An industry buyer was found for this winery and vineyard. The buyer was a vineyard owner with a high quality label, who was looking to expand his operations and chose to buy an existing facility rather than build one from scratch.

After successful implementation of the exit plan the winery sold for a premium.

Issues that could have derailed the transaction were for the most part resolved prior to due diligence.

Despite a difficult and lengthy due diligence there was no request for re-negotiation of the buyer’s original offering price.

Every business will benefit from developing and executing an exit strategy. You can’t take short cuts and expect to still achieve your goals and objectives. You never know when your health or the market may adversely affect your business. If you focus on building business value and spend time each year perfecting your exit strategy, you will be in a better position to win. Contact us today to start developing your exit strategy.

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Case Study - Winery

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