In the last six weeks, there have been three separate private equity transactions in the craft space: Uinta Brewing, based in Salt Lake City, Utah., sold partial ownership to The Riverside Company. New York’s Southern Tier Brewing sold a partial stake to Ulysees Management LLC, a diversified investment firm with over $1 billion under management, while Atlanta’s Sweetwater Brewing sold a minority interest to TSG Consumer Partners. (And as long as we’ve mentioned TSG, let’s not forget about Pabst, who last month sold to a partnership between that firm and Russian brewer Oasis Beverages.)
So there’s now a steady stream of private equity money flowing into craft — but will the floodgates open fully? How will the influx of investment capital impact the competitive landscape, and where do craft brewers see merger and acquisition activity trending over the next year?
“We see a moderate increase in deal activity by both strategics and financial sponsors, as well as a general higher level of dialog amongst craft owners around succession planning and exits, particularly as the operating environment continues to get more competitive,” said Townsend Ziebold, the managing parter of First Beverage Group, which advised on last year’s Boulevard acquisition and this year’s Southern Tier transaction.
Nonetheless, Ziebold doesn’t see the floodgates opening anytime soon.
“Most craft owners will likely not pursue liquidity options in the next 6-12 months, although we note today is a ‘sellers’ market and this may not continue as the larger strategic buyers complete their M&A strategies and the number of craft owners seeking liquidity in the future increases,” he wrote to Brewbound.
Still, while Ziebold believes there will be a “small number of both strategic and financial sponsor deals” in the coming months, he doesn’t think the inpouring of private money will drastically change category dynamics.
“We do not think it radically changes the landscape,” he wrote. “It simply means there is a larger availability of partners for craft owners seeking liquidity. It is still very much about picking the right partner for your company. The future of private equity and family offices in the craft space will very much depend on how well or not well some of these early deals are managed.”
We wanted to know what brewers were thinking, so we traveled to the 2014 Great American Beer Festival in Denver, Colo. to ask attendees how they felt about private equity in craft and how it changes category dynamics.
Many brewers we spoke to expressed concerns over the long-term commitment from private investors, but agreed that more deals are likely on the way.
Hear to what brewers and distributors — both large and small — had to say in the video, included above.