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.