Another craft brewery has sold itself back to its employees.
Vermont’s Switchback Brewing Company, known throughout New England for its popular Switchback Ale, today announced the establishment of an Employee Stock Ownership Plan (ESOP), transferring 100 percent of the company’s stock into a trust backed by GreatBanc Trust Company.
The company did not disclose specific financial terms of the transaction, but co-founder Bill Cherry told Brewbound that he, along with partner Jeff Neiblum and other minority investors, were able to participate in an immediate liquidity event after the company financed part of the transaction with a loan from People’s United Bank.
Cherry and Neiblum have simultaneously extended unsecured promissory notes to Switchback Brewing Company that will be paid back over a 15-year period, Cherry said.
In turn, current employees will take over ownership of Switchback Brewing Company and receive shares of the company based on individual salaries. Brewery workers who remain employed will continue to accrue company stock over time, Cherry said, and future employees who work 1,000 hours in a calendar year will also be eligible to participate in the ESOP.
“I haven’t even grasped it all yet, to be honest,” he said of the deal. “It’s definitely more than I would have ever dreamed of and, for the employees, it’s one hell of a retirement package.”
Cherry will remain with the company as brewmaster and president, according to a press release.
Devine Millimet Attorneys at Law acted as advisors on the transaction and SES Advisors will serve as the third party administrators, Cherry added.
The decision to sell the company back to employees began about four years ago, Cherry said, noting that he spent time learning about succession planning from other brewery founders, like New Belgium’s Kim Jordan and Boulevard’s John McDonald.
“We have this wonderful business that has grown and I don’t have much money; I have buried it all back into the business,” he said. “This was a nice way of turning that value into cash while I am still young. Now we can spend the next 15 years preparing for when I am not around anymore.”
Cherry, 54, said several private equity firms and investment groups approached him with offers to purchase the company, but he never considered anything other than an ESOP transaction.
“When I would get contacted, I would never follow-up,” he said, adding that the “maturity” of his business was what led him to consider an exit.
“This was a good age to do it — we have everything in place the way we want it,” he said. “The valuations also aren’t going to get any higher, but that wasn’t a motivating factor.”
Switchback, which was founded in 2002 and was only available on draft for its first 10 years, grew more than 25 percent in 2016, to 30,000 barrels, thanks in part to the introduction of 6-packs.
About 90 percent of the company’s sales come from its flagship product, Switchback Ale, which Cherry described as a beer designed to “fool everyone into having a much more complex flavor profile than they were used to.”
“The market has drifted around us in so many directions, and that 2002 flavor profile continues to be unique,” Cherry said. “As the newer breweries are pursuing extraordinarily hoppy styles, they have left mine alone.”
Distributed throughout Vermont, Maine, New Hampshire, Rhode Island, Western Massachusetts and parts of New York, Cherry said he expects the company to grow another 25 percent in 2017.
Switchback joins Odell Brewing, Harpoon Brewery (which also has a Vermont location), Deschutes Brewery, New Belgium Brewing, Left Hand Brewing and Alaskan Brewing as notable beer companies that have also established ESOPs.
In 2015, Oregon’s Full Sail Brewing exited its ESOP after selling to San Francisco-based private equity firm Encore Consumer Capital.