Here’s a bold prediction: 25 craft brewery transactions in the next 12 months.
At least, that’s what Bill Anderson, the founder and CEO of investment and advisory firm First Beverage Group, believes is the inevitable short-term future for craft.
Speaking to a room full of brewery executives, distributors and investment bankers who attended yesterday’s Beer Marketer’s Insights conference in Chicago, Anderson characterized craft beer as the “hottest category in CPG (consumer packaged goods)” and confidently stated that the pace of craft deals is about to pick up.
“I think there could easily be 25 more transactions in the next 12 to 15 months,” he said, adding that attractive multiples coupled with a growing pool of interested buyers and investors has led to “a huge acceleration of brewers” looking more seriously at the both exits and capital infusions from private equity firms, family offices and strategics alike.
“Big checks have a way of opening doors,” he said.
And although Anderson wouldn’t comment specifically on any transactions that his own firm was involved in – First Beverage advised on the Boulevard Brewing, 10 Barrel and Southern Tier deals – he did suggest that some fast-growing craft breweries are fetching as much as 18 times earnings.
Anderson said he’s counted “at least six or seven rollup groups” that are approaching acquisitions with more of a portfolio mindset, adding that many of those companies are also eyeing public offerings as an eventual exit strategy.
Anderson also hinted that one top-ranked craft brewery was currently looking at its own IPO; something he believes could happen within the next six months.
“The business of craft beer is going to radically change,” he said, comparing it to the real estate sector.
“This was a great little neighborhood created by Kim [Jordan], Jim [Koch] and Ken [Grossman],” he added. “Now there are a few people down the street building McMansions. They want to come to your barbeque but they aren’t bringing anything. They just want to eat your food.”
Craft businesses like Boston Beer, Sierra Nevada and New Belgium were more predictable when fewer players were competing in the space, Anderson said. But with more money flowing into craft, the “core business” will become less predictable and motivations will differ greatly from the category’s original founders.
Nevertheless, Anderson doesn’t believe the spirit of the movement or the general collegial nature of craft will suddenly disappear, even as more professional money managers take over the books.
“I think it will be frothy for another two to three years, and I think it will change the nature of the business of this industry, but the consumer part will not be as affected,” he said.
Maintaining the collegiality might be a focus for brewery founders, but not for one investment banker who, prior to attending the Craft Brewers Conference last month, opted for a more aggressive approach to dealmaking.
In a solicitation e-mail sent to craft brewers and obtained by Brewbound, a partner with Arlington Capital Advisors teased a forthcoming “top 15 brewery transaction” and indicated that foreign companies like Heineken International, Asahi Breweries, Carlsberg Group, Sapporo Breweries, and Suntory Holdings all have expressed a “deep interest” in craft.
That same email also suggested that Boston Beer Company and other domestic strategic buyers had made bids on the company’s previous transactions, which include SweetWater Brewing’s minority sale to TSG Consumer Partners and Enjoy Beer’s acquisition of Abita.
And while it’s not known which craft brewery owners are currently looking to sell, Anderson made it clear that more transactions are on the way.
“There is a tremendous amount of money on the sidelines that wants to get into this industry,” said Anderson.
“I think this is a unique window of very high multiples and very able, willing, hungry buyers,” he said. “This window may not happen again for another eight to ten years.”