Tuesday, August 16, 2011

Where's the money?

A wine business and law blog specializing in the wines of California, Argentina and Patagonia English – Español

Wineries Seeking Capital: Back to Basics

August 15, 2011
What can a winery do to grow or successfully overcome a distress situation? At a recent wine law seminar I attended in Napa Valley, we discussed some options for wineries such as selling the winery or seeking capital. A panel composed by Quinton Jay, managing director of Bacchus Capital Management, William Stevens, of Silicon Valley Bank and Matt Franklin, Principal of Zepponi & Company gave their advice, which I want to share with you.
If you have a winery that you are interested in selling, the panel agreed that having your financial house in order will go a long way toward attracting buyers. William Stevens suggests that you prepare well in advance. Even if not a near term consideration he said a winery should always be ready to be sold. Ideally, you should plan the transaction at least 12-18 months ahead.
Assemble a transaction team consisting of an Attorney, CPA and Tax Advisor. Clean up your accounting; any potential buyer will review your books and will need well maintained records. Put together financial projections – this will add to the transaction’s value. Gather all documents that a buyer will want to see like existing contracts, licenses, permits, etc. Lastly, finalize any liability issues such as debt, insurance, intellectual property or pending law suits.
If your winery is facing distress, time is of the essence. It is critical to identify and acknowledge a problem early in order to prevent it from worsening. Start an honest dialog with lenders, advisors and capital markets. There may be several alternatives, so be open-minded and listen otherwise your options will likely be limited.
Perhaps you have the opposite problem and you need money to expand your business in order to increase sales. For this you will need to seek a lender or capital investor. Your challenge will be to convince them to give you money, so give yourself the best chance. Demonstrate your thorough understanding of the issue and outline the attempts you have already made. Have specific answers ready, for example, why you need more capital and how you intend to use it.
If you decide to seek an Angel investor you will need to present them with a coherent business plan. If the first investor doesn’t work out, review your answers and be persistent. Talk to many Angels until you find one willing to listen to you. Most importantly, don’t forget the basics: talk about how good your wine is, how many people are in your wine club, how you are marketing via with social media, how much you love your work site and your plans to make the best wine possible.
Some of these recommendations may sound like common sense, but it does not mean that you will find solutions easily. Basic homework like keeping your winery accounting in order, facing your problems promptly, putting together a plan of action and demonstrating that you are a hard worker will go a long way, though.
Quinton Jay from Bacchus Capital said that one of the things that convinced him to provide capital to Cameron Hughes was when he saw him pouring his wine and talking to consumers on a weekend trip to Costco in Danville. This simple action showed him that he was a hard worker and willing to do whatever it took to grow his winery.
Sometimes it’s as basic as that.

The above information is provided for informational purposes only and does not constitute legaladvice. You should consult with an attorney on the specifics of your case. 

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