Will These Latest Fires Affect The Wine M&A Market?

row of grapevines with red and gold canopy

“First of all, it’s hard to see how the winery M&A could get much worse”

This statement is somewhat tongue in cheek, but at the same time absolutely true. 

With one Napa client postponing the launch of a marketing effort in order to battle it out with their insurance company and begin fire repairs it’s easy to say that this year’s conflagration in the wine country is going to affect the plans of individual winery owners, but what about the M&A market as a whole? From the outside looking in, the very public story of smoke taint and its affect on wine production in Napa in particular (https://tinyurl.com/y3wrv8r8) – would seem on its face to depress interest in winery acquisitions.  But as an insider I can say with some confidence that these events will only have modest effects on the M&A market. 

First of all, it’s hard to see how the winery M&A market could get much worse.  This statement is somewhat tongue in cheek, but at the same time absolutely true.   Very few wineries or wine companies are sold each year.  In an article I researched and wrote in 2014 (link) I explained why there are on average only 20 transactions a year.  For a variety of reasons both 2019 and 2020 have been particularly weak for M&A.  (Among those reasons are that two major players – Constellation and Gallo – had their large brand transaction hung up by regulators throughout the period.)  Only 13 wineries or brand transactions were announced in 2019 and at this point in 2020 we at GWP count only 13 deals so far[1], including Gaylon Lawrence’s recent purchase of Burgess Cellars just weeks before the fires that razed that winery. 

Through the end of this year and beyond, winery M&A is likely to remain “normal”.  There are a number of reasons for this:

  • On a macro level, with the Federal Reserve pumping liquidity into the economy, rates will remain low and investor sentiment will remain high. Investments in real estate assets will continue to be attractive.
  • The consumer continues to buy wine through the pandemic.
  • Although there is well-publicized damage to higher end wine volumes for the 2020 vintage, this fire (unlike the 2017 fire) is occurring in a cyclical wine supply surplus.
  • The wine M&A market is largely wineries acquiring other wineries, and the most active companies in the acquisition market are large companies who are financially strong and who will continue to pursue the strategies (whether it’s asset-light or real estate centered) that they pursued before this latest year of fires.
  • Although the financial repercussions of a skipped vintage are serious, the fact that wineries in the Napa Valley in particular are taking drastic actions to preserve wine quality will protect “brand Napa” in the long term.

So, while the overall winery M&A market will remain stable at +/- 20 deals per year, it’s very likely we will see some changes in the short term.  These may include:

  • Some types of buyers not already invested in the wine industry or wine country (financial or lifestyle buyers, respectively) may pull back from acquiring wine country properties, however they are a minor factor in wine M&A.
  • I have long said (based on historic data) that Napa Valley vineyard and winery values plateau in downturns, they don’t decline. However commercial real estate is at its most fundamental level driven by the income derived from the assets.  If wineries and vineyards determine that they will have to factor in some more regular risk of lost vintages, this has the potential to affect property values.
  • Interest in risk mitigation through geographic diversification may increase wine companies’ consideration of investments in different states and different appellations.
  • No one need be concerned that they are buying “at the top of the market” any longer. This will bring some buyers off the sidelines.

These fires are a trial and a tragedy for our region and wine communities across the globe (let’s not forget that the Australian wine industry experienced a challenge of a similar scale earlier this year during their harvest.)  Still, as long as there are consumers wanting to enjoy wines, this industry will continue to thrive and the normal economic cycle of business formation and growth, business failure, and the occasional merger or acquisition, will continue. 

 [1] GWP keeps notes on announced deals but we don’t catch all of them and some transactions aren’t officially publicized, so there will be a few we missed.  In the 2014 Wines and Vines database search we were able to capture a more complete story.

2019 Was a Terrible Year for M & A

close up of purple grape cluster on the vine

“The Wine M&A Market is small principally because there are few buyers, which tend to be other wine companies.”

To quote HRH the Queen of England circa 1992, 2019 was an “annus horribilis” for winery and wine brand acquisitions. 

The trouble started at some point in late 2018, when Goldman Sachs – which had the mandate to sell 30 of Constellation’s lower-priced wines – went to its M&A advisory “bag of tricks”. [i]  It was a leak to Reuters about the sale, then “valued” at $3.0bn.  This caught everyone’s attention in the industry.  As a wine M&A specialist, my reaction to the leak was that it appeared Constellation’s advisors didn’t understand the dynamics of the wine industry, where distributors are a force to be reckoned with.  A disclosure like this in the beverage alcohol space can do very dramatic damage to brands because distributors, faced with the possibility of losing the business to the buyer’s distribution network, can take their shoulder off the wheel of the brands that are for sale. 

It further appeared that in taking this risky step, Goldman had run out of ideas about buyers and was hoping to find someone in the global landscape that they hadn’t contacted during their confidential process.  Months later, a quote from Constellation’s CFO at an industry event – that they were only looking for 7X EBITDA for the brands – seemed to signal that there was a potential bidder they were trying to bring back to the table.

Finally, in April of 2019 a deal between Gallo and Constellation, by then worth (only) $1.7bn, was announced.  The parties intended to close by the end of May 2019, but in mid-May the FTC put the transaction on hold as it reviewed issues related to competition.  During what became a protracted process, originally thought to end by November 2019, rumors (which turned out to be true) circulated that the consolidation of a substantial portion of low-priced sparkling wine and brandy brands, in addition to grape concentrate (which is a winemaking input) was deemed to be anti-competitive, and those businesses would be taken out of the deal.  The transaction was now slated to close by the end of February 2020 with Gallo paying $850MM for the remaining brands, plus an additional $250MM if certain sales targets were met. 

What does this one transaction have to do with the wine M&A market as a whole?  First, that market is small.  Smaller than people think.  Based on research I conducted and published with Wines and Vines a number of years ago[ii], the average transaction volume is about 20 deals annually.  According to public reporting as tracked in our office, only 13 deals were announced in 2019.  (Compared to 20 completed and announced in 2018.)  The wine M&A market is small principally because there are few buyers, which tend to be other wine companies.  When two of the biggest and most active buyers are locked up in their own deal, and when there are rumors that some large acquisition targets for other active buyers (Cooks Sparkling, Paul Masson Brandy) might be had at bargain prices….  The already small pool of buyers shrinks further.  And the result is transaction activity 2/3s of an already small “normal”.

As I write in March of 2020 the Constellation/Gallo deal has not closed.  Industry contacts assure me that it will.  When?  No one knows.  We have recently seen some green shoots of business activity (including Gallo’s own acquisition of the Pahlmeyer brand).  It is still too soon to tell, but let’s all hope 2020 will be a “normal” year for winery and wine brand acquisitions.     

[i] This story that I am telling about the Constellation/Gallo deal is gleaned from public announcements and rumors and a little guesswork – I have no inside information.

Are the wine country fires a black swan?

Bella Oaks Vineyard in the fall with red canopy on green grass

“Of course there can always be a black swan event.”

A few months ago, I was speaking with a business owner who was thinking of selling his wine company. He asked the perennial question: “Is this a good time to sell?” Among my responses regarding the strength of his brand, the sustained growth and optimism in the wine industry as positive factors, I included one caveat: “Of course, there can always be a black swan event.”

From Wikipedia: “The black swan theory of events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.”

The wine country fires that have ravaged the North Coast wine region are certainly a “surprise”.  Will they have a major effect on the winery M&A market? The short answer is that it’s too soon to tell, but here are some changes that I’ve seen as an advisor active in the market:

  • A Napa Valley Winery owner cancelled a planned site visit scheduled for October 13th to see a property he was considering acquiring. His winery was under threat and he was evacuating his family. The site visit has not yet been re-scheduled.
  • During the first week of the fires, and even through to the second week, deal closings came to a standstill.  In part because the lawyers involved in the contract negotiations had been evacuated.
  • The region and the industry really are in shock.  If you didn’t lose a home, you know someone who did. The lingering effects of this trauma are unknowable, but certain to be there.
  • Grape/wine supply scarcity was already a growing issue. Although the damage to vineyards and to wines was likely minimal in relation to actual production, markets are highly sensitive to perceptions.
  • And finally… the vulture capital investors have shown up. I recently heard from an investor that hadn’t contacted me since the ’08/’09/’10 market.

My hunch is that these fires will accelerate trends that were already present in the market, rather than dramatically changing the market.

M&A activity in the wine space had already decelerated, mostly driven by buyer management capacity limitations (they’ve bought a lot and need to absorb the acquisitions they already have). That will likely continue, with a return to a “normal” from a “hot” market. Grape scarcity was already an issue. With this event it is certain that brands without either contracted grape and/or wine supply or flexible future sourcing options are likely to struggle to find a buyer.

On the other hand, while transactions that were well on their way to completion will be wrapped up in the next few months, there will likely be a pause in the launch of new selling efforts. I, for one, am advising my clients to sit tight until January. 

What will your wine company sell for? (Part 2)

sparkling wine bottles in a riddling rack

Part 2 of an insider’s look at the EBITDA Multiple and its ability to predict valuations



In April, GWP published Part 1 of this blog on winery transaction values, outlining a few of the reasons why the commonly referenced “EBITDA multiple” is not terribly predictive of what a winery owner might sell their company for in an actual transaction. The ultimate message of that piece and this one is that the real-world drivers of value in a transaction relate to the intersection of a seller’s brand attributes (growth, profitability, product category etc.) and the needs of the buyer. Any one or more “multiple” of financial performance will not determine a price.

Seller with wine barrels on sides of walk way.


A Brief Example

When preparing to market a winery or wine brand, as advisors we must determine a reasonable estimate of what a buyer might pay for our client’s business so that they can make an informed decision about whether to proceed with a sale effort, and then to set an asking price. We do not use an EBITDA multiple to do that. 

Three brand-only transactions negotiated by our company were used last month as examples. Their sales prices yielded EBITDA multiples ranging from 11X to 34X. Now we’ll open the data set a bit wider to include revenue and gross profit multiples, and also to include some broader measures: an average of public company valuations and wine industry transaction averages (using a larger private and public company data set.)

The first thing to note here is that we are using the EBIT multiple, not EBITDA. ² The second thing to note is that the earnings multiple is the most variable (and therefore less predictive) measurement. Both the Revenue and Gross Profit multiples fall within a much narrower range of results. That is why, when it comes to estimating what the value of a wine company might be in an arms-length transaction with a motivated buyer, we generally consider the “top line” multiples to be much more useful benchmarks. 

Why are EBIT or EBITDA multiples so variable? The operating expenses of wine companies are idiosyncratic, and wine business models are highly variable, ranging from negociant to estate, 3 tier to DTC, and everything in between. The buyer can move the needle on operating expenses widely after a transaction, where cost synergies for selling and administrative overhead are quickly realized. But the bottle price of a wine product is not readily changed once the brand is established with the trade and consumers. Therefore, the top line of the income statement is really what the buyer is stepping into in an acquisition.


So, to reach back to the prior blog on this subject: If you have revenues of $5MM, does that mean your winery is worth $15MM? Maybe, but probably not. There are too many variables in wine company business models and asset structures, too few buyers and too many sellers, too much complexity in the industry to really predict what the end of a sale process will yield. (Or if it will yield a transaction at all.) In the end, transaction multiples describe deals that are completed, they don’t determine the outcome of an arms-length transaction.

Winery Valuation: The EBITDA Fallacy (Part 1)

estate on a hillside partially obscured by foliage

Part 1 of an insider’s look at the EBITDA Multiple and its accuracy as a valuation indicator



There is often talk in wine business circles about the “EBITDA multiple” describing the valuation of a company after an acquisition is announced. However, this multiple may be irrelevant with respect to what drives the final transaction value when negotiating an actual sale between two parties. Commonly a 10X EBITDA multiple is talked about as “average” in today’s market. So, if you own a winery with “Earnings Before Interest, Taxes, Depreciation and Amortization” equal to $1MM, your company will sell for $10MM, right? Maybe, but probably not. [i]

Cellar with wine barrels along side of walk way


Here are the descriptions of three brand-only transaction negotiated by GWP:

So clearly in this data set, a standard earnings multiple was irrelevant. How is the value of a winery business determined during an actual sale process?

  • The most important factor is whether the brand/winery you are selling is EXACTLY what the buyer wants or needs for their strategic plans. If you are lucky, you will have more than one motivated buyer, in which case you have negotiating leverage, which drives up the final sale price.
  • Once you’ve met the hurdle of having an interested buyer, the other aspects that drive valuation include such things as sales growth, scalability from both a sourcing and distribution standpoint, intrinsic profitability, and your product category (e.g. Pinot Noir when Pinot’s a hot product category.)
  • By intrinsic profitability we mean that a wine brand’s established bottle price relative to the acquirer’s production and selling costs are at or above normal profit levels. In the examples, above, Seller A had strong to normal profitability in their current operation, and would continue to do so for the buyer, so this EBITDA multiple was in the “normal” range. Seller C had abnormally low profitability due to high costs, but the brand profits would be normal for the buyer, who had significant economies of scale and underutilized capacity. The transaction valuation (driven by strong growth) in relation to Seller C’s low net profits therefore skewed the EBITDA multiple higher.


So why all the talk about EBITDA multiples in describing winery transactions? To begin with, we all prefer to simplify complex situations. Furthermore, this is the valuation metric frequently referenced with respect to publicly traded companies, so it’s a more common and familiar metric across the whole economy. But the wine merger and acquisition market is largely made up of privately held companies selling to privately held companies. This is why a multiple of earnings is a less reliable predictor of what the price of a seller’s brand will be in an arms-length transaction when the money changes hands.

Timing the Market: When to Sell Your Winery

hillside vines of sangiovese

There is no bad time to plan and prepare to sell


A lot of quality transactions have been announced in the last 18 months. All the big players: Gallo, Ste Michelle, Jackson Family and many more have acquired high-profile brands. This naturally raises the question in the minds of winery owners: Is this a good time to sell? 

Most winery owners believe that the most important factor when considering a sale of their winery is market timing, i.e., timing a transaction to occur when the market for wineries is favorable. This sounds good in theory, but it requires predicting the future, which of course is fraught with peril.

Wine glass with white wine


In the many years that our firm has been engaged in selling wine companies, we have operated in every type of market. We launched a sale effort of a prestige company when the winery M&A market was at a high point and the bidding resulted in a record- breaking price. Due diligence was then completed and the closing was scheduled for October 31— which unfortunately fell just after the financial meltdown of 2008. As a result, the buyer pulled out and the sale did not close. 

Conversely, shortly after that transaction terminated, but now at the depths of the “Great Recession” — the low point for winery sale transactions — we launched another sale process. This winery sold at a very high price, despite the terrible market timing, first because the business was a successful operation at a strategic inflection point with great future potential, and second because, before the sale effort was launched, the winery was fully prepared for sale and therefore positioned for maximum value to the buyer. 

In both examples, the results occurred despite current market conditions – not because of them. The lesson from this consistently inconsistent pattern in history is clear – sales are made, not timed. 

The length of time required to decide and prepare to sell, conduct a sale process, find a buyer, negotiate and close a transaction is such that the market conditions at closing are almost always different than at the beginning, or even the middle of the process. 

On the other hand, there is no bad time to plan and prepare to sell, so that you’re ready when the time comes to launch a sale process. Proper preparation is critical to success and takes time – much more than one usually imagines. This preparation includes considering the best timing for the individual circumstances of the winery and its owners, which is far more important than more general market considerations. 

There are certainly bad times to launch a sale effort, which more often depends on a winery’s individual circumstances. While the current transaction market reflects robust wine sales and buyer optimism, the only thing that we can predict about the transaction market tomorrow is that whether for better or worse, conditions will change.


Wineries Are Small Business Too

man tending to vineyard with a rake

Happy small business week from Global Wine Partners


Happy Small Business Week! I have been thinking a lot recently about the fact that most wineries are part of that quintessentially American story: entrepreneurship. What better time to acknowledge that fact than during a week dedicated to celebrating the vital role of small businesses in our economy and our culture?

There are almost 9,000 bonded wineries in these United States. Yet, approximately 90% of the wine consumed in the US last year was sold by the top 10 companies. This means that the American wine industry is principally made up of very small wineries selling locally produced wines directly to customers in their communities. In other words, winery owners are small business owners. 

To celebrate their week, I am offering to those hearty souls – the American wine entrepreneur — a few of the success-strategies I have observed over my 30-year (!) career working with small business owners:

  • Know Your Numbers It is surprising but not uncommon when I work with a winery to find that the owners do not know the actual costs of producing their wines, and most importantly do not know that cost in relation to what the product is being sold for (net, of course, of sales incentives and other direct selling costs.) It is a boring but necessary part of running a wine business to understand which products are working, and which are not, in the only sense of the word “working” that should matter to a business owner: profits.
  • Do Not Fall In Love Being passionate about your winery is an important component of selling wines in a crowded marketplace. However, the successful business owner makes rational decisions. I have great admiration for a client of mine who has tried twice to launch products based on a varietal he loves working with as a winemaker. But twice the wines have failed to take hold in the marketplace. And so for a second and final time he has effectively “shot the product in the head” and moved on.
  • Be a Businessperson First, Winemaker Second I like to say, somewhat tongue in cheek, that I can tell a winery that is run by a winemaker by the number of SKU’s it has. Back in my commercial banking days, a client called me during harvest, very excited, to say “I have an opportunity to get some incredible Syrah grapes… What do you think I should do?” To which I replied, “It is better to let your business plan guide your grape purchases, than to have it the other way around.”
  • It’s About Selling, People Wine quality is necessary. Authenticity and a compelling “story” are important. But it’s selling that separates the men from the boys in this industry. And by “selling”, I mean (see above) getting your wine(s) into the hands of the end consumer at a price that allows you to pay your bills, reinvest in your business, and make a good living.


It has been an honor throughout my career to work with the entrepreneurs who are such a vital part of the American story. These are the people who generate two out of three new jobs in our economy. In the wine business in particular, with its capital intensity, regulatory hurdles, and stiff competition, those who choose to take a chance and set out to start their own company are real economic heroes. 

So to all of you, keep fighting the good fight!

Wine and The Con Artist

man dressed in 1920s-era clothing

There is no shortage of crooks and con artists in the American business landscape.


A friend of mine and I were exchanging e-mails a few weeks ago about the mounting financial difficulties of Robert Dahl, the winery owner who became famous last week for murdering one of his investors in a vineyard just south of where I am sitting. My comment then about the people who create these types of financial disasters was, “it’s sometimes hard to distinguish between the stupid and the corrupt.” I think we have our answer now with regard to Mr. Dahl.

Ponzi, Male standing in suit with hat on smiling at camera.


There is no shortage of crooks and con artists in the American business landscape, (see CNBC’s ‘American Greed’ – Napa Valley addition coming soon) but I do think that there are some special aspects of the wine industry that make it particularly attractive to the type of person who prefers to take money from others rather than trying to earn it. First, these are communities with a lot of wealth, populated by many people who have come from other places. A stranger showing up with a story of financial success is not unusual here. Then there is the allure of owning a winery. For a con artist to separate experienced investors from their money, they need to have (or create) a circumstance where normal caution might be set aside. A beautiful winery in a bucolic setting, alcohol and good food can certainly set the stage. 

As an advisor to winery owners selling their companies, I have developed an instinct for identifying a con, in order to dismiss them as a prospective buyer.

Here are some of the hallmarks of a person not to be trusted:

  • Name dropping
  • Comes with a story of success and spins a tale of fantastic opportunity
  • Appears wealthy
  • Wants to use other people’s money (or property)


In the world we live in today, avoiding being taken in really only requires a healthy skepticism about the stories strangers tell us and access to the internet. 

For example, in the depths of the wine industry downturn caused by the financial crisis, I was working with the owner of a winery and vineyard that had been on the market for some time. He called me one day to say that he had been approached by some “investors” interested in leasing the property. A simple Google search turned up an SEC indictment of one of the parties for investor fraud. Tellingly, they had perpetrated a scheme involving a leased property. Conversations with real estate brokers throughout wine country revealed that these investors were talking with everyone who had a property that had been sitting on the market. 

We usually think of a con artist as someone who operates on a personal level with small targets like little old ladies, not sophisticated business people like ourselves. The truth is that sometimes a crook can engineer a multi-million dollar fraud. For winery owners and investors alike, the old adage, “if it sounds too good to be true, it probably is,” should always stay at the back of our minds.

Will 500 West Coast Wineries Sell?

row of vineyard with a large hillside behind

What the wine mergers and acquisitions market really looks like

There is a widely held perception in the wine industry that merger and acquisitions (M&A) activity is currently quite robust, and that selling their wineries is how owners will exit the business.

In a report published by Silicon Valley Bank earlier this year (“Ownership Transitions in the Wine Industry”), more than 10% of the winery owners surveyed were “strongly considering” a sale in the next five years. Will 500 West Coast wineries actually be sold in the next five years? The short answer is no. For a variety of reasons, the 10% who are thinking about selling today will result in 2% who actually do.

It is true that there is currently a strong level of transaction activity in the wine industry. However, most sales have been of vineyards and the occasional winery facil- ity. These are real estate sales transactions, which sometimes get erroneously conflated with M&A. The winery merger and acqui- sition market (meaning the sale of a wine company and/or associated brand[s] as going concerns) is quite different, with activity levels currently slow to normal. It is difficult to see perfectly what hap- pens in the wine industry M&A market, since there are so many small operations, and many transactions are not publicized. However, a review of the data about West Coast wineries collected by Wines Vines Analytics from 2005 through September 2014 provides a clear and remarkably con- sistent picture. (Included in the many inter- esting facts in this data, used for the Wines & Vines Directory/Buyer’s Guide and other services, is the ownership of the winery, for most entries.) On average, there are approximately 20 M&A transactions a year. There are some basic microeconomic principles that can explain why, although there are 500 winery owners who currently want to sell their wine company and/or brands, there are only 100 who will.