When you need a friend, winery M&A w/ Erik McLaughlin, Metis

Coming from the winery operator world and having sold a winery, everyone asked Erik McLaughlin how he did it. That led to the founding of Metis, a wine industry specific M&A advisory firm. Erik discusses the state of wine industry M&A, what an M&A advisor does, and what needs to happen to get the wine industry back on track.

Detailed Show Notes:

Erik’s background: 20 years as a winery operator, sold winery to Crimson and then started M&A firm 10 years ago

Metis started as a division of Exvere bank, but then split off independently

M&A firms buy and sell businesses / wineries vs selling assets, which a real estate broker does (Metis also has this)

Fall 2026 is the most challenged time in Erik’s 30 years in the wine industry

• Many wineries over leveraged and cost of capital is rising
• Consumer demand is softening, margins getting compressed
• Inflation and tariffs increasing cost of production
• Excess inventory leads to no pricing power and often financed with lines of credit where rates are increasing

There are more sellers than buyers of wineries, Metis has to be selective with clients due to high opportunity cost and desire for a high success rate

• Many wineries are not sellable (e.g. - too personalized, not differentiated, weak financial strength)
• If wine M&A firms don’t take clients, they often end up with real estate brokers or non-wine experienced brokers
• Characteristics of sellability: portability of the business, desirable assets, and profitable business

Gundlach Bundschu CH11 bankruptcy: buyers’ offers didn’t’ clear their debt, banks rejected them; in the past banks would just give businesses more rope

May be able to get assets cheaper in bankruptcy, but in worse condition

Large disconnect between buyers (40-60% discount) and sellers (10-20% discount) expectations, leading to a lot of inaction on M&A

3 types of transactable deals

• Puzzle pieces - a unique match that create value and is not substitutable, still has strong valuations
• Price - price gets too good
• People - people already know each other and often do business together

Valuations

• Sold a couple vineyards for record setting prices (only for the right assets)
• Distressed situations getting very low pricing

Main buyers today

• Historically were the large wine companies; but either not acquiring or very cautious, many are now sellers
• High net worth / family offices - more challenged now as wineries less fashionable, most want a real business
• Financial buyers (both institutional and opportunistic investors) - a lot of new buyers hovering, but not a lot transacting; like bigger transactions to make the deal worth it (often looking at ~$10-50M)

Metis expanded into CA and Europe ahead of plan, partially due to a competitor selling to a bigger bank

• CA more pessimistic on wine market and more proactive in making changes
• CA and WA more aggressive in removing vines
• OR last to remove, has not had severe weather conditions since 2020 (used to be every 3-4 years), building oversupply
• Europe totally focused on export

Metis pricing model - get a % of transaction value + retainer which is credited against transaction fee

• Takes engagement fee up front and retainer when once an offer is accepted
• Engagement fee important to have sellers have skin in the game
• Competitors often take fixed monthly retainer

What a client gets from Metis - a confidential marketing process to qualified buyers

• Has >1,000 prospective buyer list, narrows down to 30-60 for each deal
• Private, direct outreach to each prospective buyer
• Business modeling and proforma financials w/ recommended business changes
• Confidential Information Memorandums (“CIMs”), a full marketing package
• Tax and legal work to optimize transaction
• A friend and “therapist” through the sale process which can be lonely

Wine industry pathway needs consumption stabilization, then work down excess inventory to re-balance wine industry, then a lot of M&A will happen

Hosted on Acast. See acast.com/privacy for more information.