During a panel discussion on succession planning at this month’s Craft Brewers Conference in Denver, Colo., New Belgium co-founder Kim Jordan had a message for startup brewers currently in the process of constructing their business plans.
“While it’s certainly important to have a succession strategy, if you are — as you’re getting your entrance plan to being a brewery — already planning your exit plan and that’s one of your primary pieces of focus, we think that things are perhaps in the wrong order,” she said. “While it is important to do that, most of us who are currently looking at succession strategies got into this business because we love beer and we love the community of brewers and we love plying an ancient craft and we hope you do to.”
But having passion doesn’t always mean profits. That’s why Jordan, along with Schlafly co-founder Dan Kopman and First Beverage Group vice president, J.B. Shireman, shared insights into the various succession strategies for craft brewers.
In describing the types of language surrounding succession planning, the trio grouped preferences into three major buckets: company perpetuation, founder’s liquidity and succession planning.
Jordan shared her definition of company perpetuation, a pillar she believes should be the primary consideration when doing a deal.
“It’s not about how much money we will get and it’s not about who will run the company later, it is about the legacy of the company,” she said. “How are we going to make this transition in a way that honors all that we’ve done to get here to date? There an overriding theme of ‘I don’t want this to have all been for not.’ That in my mind, is captured in the phrase, ‘company perpetuation.’”
An important, but perhaps less essential, consideration, at least for Jordan, is founder’s liquidity.
“That piece of the bucket is ‘how I will reap the reward of X number of years of work in this company,’” she said. “For many people, while it is a consideration, it is not the thing that most of us got into this for.”
Finally, Jordan explained how broad sweeping the term “succession planning” really is.
“There is a whole continuum in this succession piece of these three buckets,” she said, noting that it runs concurrent with the planning process.
Exit strategies can vary, said Jordan. Succession can come in the form of “executing a deal and making a quick exit” all the way to continuing to have an equity stake, staging a transaction or bringing in professional management to run the brewery while the never generation prepares to take over.
For Kopman, company perpetuation and liquidity are connected.
“We spent 23 years essentially building value,” he said. “The value is that liquidity. That is what you are doing. Every day that you are out there working in your brewery or out in the trade, you are creating value for your shareholders and other stakeholders, because you are making an impact in the communities that you do business. You are creating immense amounts of value but that is a continuous process.”
Successful succession planning, at least for Kopman, not only preserves the existing value a craft brewery has built but also sets forth a plan to continue creating value for shareholders or new business partners.
“Think of a perpetuation strategy as a value strategy,” he said. “How do we preserve the value? How do we continue to build value?”
So when should brewers begin thinking about various liquidity options?
“It should be something that is in the back of your mind as you are going through this process,” said Kopman, noting that factors such as age, capacity and capital can influence the decision-making process.
Shireman believes that it important for craft brewers to understand how their business decisions could enhance or detract value for potential buyers, but also feels that deals ultimately come together when the personalities and values between buyer and seller are aligned.
“When you do succession planning or liquidity strategy, the value will be what it is going to be,” said Shireman. “I would encourage all of you in this room who are thinking about this, to spend a lot of time on what is really important to you today and year from now.”
The group then explained six types of succession options — private equity buyers, family office acquisitions, initial public offerings, strategic or synergistic buyers, management buyouts, and employee stock ownership plans — and discussed their personal opinions on the advantages and disadvantages of each individual buyer.
Those options are detailed on page 2.