Selling a Craft Beer Business: Employee Ownership Versus Corporate Sale

The decision to sell a craft beer business to employees, as opposed to a beverage corporation, is a complex one. It involves a careful balance between personal goals, financial incentives, and strategic business planning. In the case of the business owner mentioned, the sale was done twice: first to the employees and then to a beverage giant. This article explores whether such a series of sales was a wise business move and the considerations behind each decision.

Background and Context

The craft beer industry is a vibrant and dynamic sector that often values community, local craft, and entrepreneurial spirit highly. Ownership decisions in this context can have far-reaching implications for the company's culture, innovation, and sustainability. In our case, the owner of a successful craft beer business decided to sell the company in two distinct phases.

Employee Ownership: The ESOP Option

One of the prominent methods for selling a business to employees is through an Employee Stock Ownership Program (ESOP). This strategy, which was likely utilized in the first sale, can provide numerous benefits. ESOPs turn employees into owners, which can foster a sense of ownership and commitment within the workforce. Moreover, under an ESOP, the owner can benefit significantly from a capital gains tax break, as the sale is exempt from certain forms of taxation if the business remains in the community and is not sold to a large entity.

Financial Implications of Employee Ownership

Selling to employees can also lead to a higher sale price if the employee base is enthusiastic and committed. The business owner can set a higher valuation for the company knowing that the employees are more likely to agree to purchase it. Additionally, the owner can receive a substantial amount of cash upfront or in installments, providing financial security.

Corporate Sale for Maximum Profit

In the second phase, the same business owner chose to sell to a large beverage corporation. This decision is driven by the desire to maximize financial returns. Corporations often have the financial muscle to pay a premium for well-established, successful businesses such as craft beer companies. While this move can lead to significant financial gains, it also comes with potential downsides, such as the erosion of the company's independent identity and culture.

Strategic Considerations

Several factors influenced the owner's decision to sell to employees first and then to a corporation. The first sale might have been motivated by a desire to build a stable, long-term ownership structure and maintain the integrity of the craft beer ethos. This could have been particularly important if the owner was passionate about the community and wanted to ensure that the business would continue to thrive and remain locally owned.

Wise Business Decisions: A Case-by-Case Analysis

Whether the double sale was wise depends on the owner's priorities and the unique circumstances of the business. Here are some key factors to consider:

Financial Goals: If maximizing financial returns is the primary goal, selling to a corporation for the highest possible price might be the best strategy. Employee Satisfaction: Ensuring that employees feel a sense of ownership and commitment can enhance productivity and loyalty, potentially leading to increased business value in the long run. Business Integrity: Maintaining the independent identity of the craft beer business is crucial for those who want to preserve the unique values and community impact associated with small-scale, craft production.

Conclusion

In conclusion, the series of sales mentioned is a complex business strategy that balances financial incentives with strategic objectives. Whether it was wise depends on the owner's long-term vision and the specific circumstances of the business. Both ESOPs and corporate sales have their advantages and disadvantages, and the decision ultimately hinges on what the owner values most: financial gains, employee satisfaction, or the preservation of the craft beer business's identity and culture.

Keywords

craft beer, ESOP, business valuation