Issue link: http://winesandvines.uberflip.com/i/365438
42 W i n e s & V i n e s s e p t e m b e r 2 0 1 4 EQUITY how has the equity/ investment/buyout market for the wine industry been in the past year? charLeS day: M&A activity is very strong for a variety of reasons, not the least of which is that asset prices have improved to the point where sellers, many of whom waited out the down- turn, are ready to put their vineyards and wineries on the market. Vineyard activity is very strong as wineries seek to lock in long-term sourcing to feed growing programs. other investors are also joining the vineyard market. Agri- culture in general has been a strong sector for institutional investors, and within the sector more investment funds are being drawn to vineyards as an option that presents very attractive returns. WiLLiaM BiShOp: Larger wineries are looking at opportunistic strategies to diversify their brand, price point and/ or varietal portfolios. over the past year acquisition multiples have been relatively flat but may likely see an up- tick, given the improving economy and movement upward in desirable price points, i.e. $15-$25 (per bottle wines). Mark BrOdy: We see the trend of smarter and smarter equity players in the market since the recovery period (2012-14). We see this as a very healthy trend. QUinTOn Jay: This past year has been one of the most busy in transactions from vineyards to wineries. I don't know if 2013 was busier than 2012, but it would be very close. rOB McMiLLan: Short story is the mar- ket is vibrant and transitions are con- tinuing at a record pace. perry deLUca: There have been few deals—focused on property changes, not brand changes. LENDERS have any players (banks, financiers, private equity, etc.) changed? charLeS day: Beyond the fact that more traditional lenders are competing in the wine industry, outside equity sources have been steadily picking up. For many, the wine industry is a desir- able place to invest, and we see more private investors willing to invest in the industry as their portfolio returns have been strong in recent years and provide the liquidity to take on direct equity positions in wineries. private eq- uity (pe) firms are always circling the industry, but the normal investment horizon of three to five years doesn't work that well with the wine industry. WiLLiaM BiShOp: Since winery financ- ing is a specialty business for banks, most current lenders have experienced senior lenders with at least 10 years or more in the industry and several bank- ers with 20-25 years' experience plus. rOB McMiLLan: The traditional play- ers remain. Several banks have made modest attempts to lend to the wine business in the past year as banks' ap- petites for assets heats up. It always seems to attract lender interest. That said, none at this stage have devel- oped a serious interest in pursuing the business. QUinTOn Jay: Many of the players are still the same. The real important issue of this question is that there are not more "buyers" in the pool, and most of them are the same ones from several years ago. With the number of winer- ies, we need to increase the pool of buyer candidates. TRENDS have there been any trends in deal size? charLeS day: In this market, we are seeing deals of all sizes. our activity with larger winery and vineyard cli- ents is growing, but so is the number of deals we're looking at with smaller clients. The strong trends in the industry, generally balanced inventory posi- tions and impressive growth in di- rect-to-consumer sales are benefit- ting wineries of all sizes. We expect to continue to see more headline- making big deals in the industry, but the rising tide definitely seems to be floating all boats. WiLLiaM BiShOp: Deal size varies sig- nificantly due to the vast variations in winery size and needs. In the past year several smaller wineries have been acquired by strategic investors looking to build a portfolio of brands, and there remain one or two very large wine companies weighing their options as to current ownership. There is always the debate by winer- ies that have capital to grow as to organically diversifying their brands and/or pursuing a strategic acquisi- tion to fill gaps in their portfolio. Multiples are beginning to creep back upward, but not to historical highs, as there is a more positive view on near-term economy. Charles Day is a regional manager with rabobank's agribusiness Division. Day is based in santa rosa, Calif., and is responsible for developing bank- ing relationships in the North bay, with a focus on wineries and vineyards. Day has been in commercial lending for 22 years, with a dedicated focus on the wine industry for the past 15 years. Day holds an Mba from san Diego state University and a bachelor's degree in finance from the Univer- sity of southern California. perry deLuca is the senior vice president and head of Wells Fargo bank's wine, food and beverage group based in santa rosa, Calif. Deluca has worked in wine industry finance for more than a decade. prior to joining Wells Fargo, Deluca was the national head of wine, spirits and bever- age distribution lending at Cleveland, ohio-based Keybank. Deluca also served as a board director and consultant to the Global Wine Group, where he was the chairman of the finance committee and a member of the execu- tive committee. F I N A N C E charLeS day "We expect to continue to see more headline- making big deals in the industry, but the rising tide definitely seems to be floating all boats." perry deLUca "Specialty lending—includ- ing equipment financing, barrel lending and asset-based lending—is on the rise."