The M&A market is in the midst of an extended “time out.” According to a Reuters article in May 2025, “the number of M&A contracts announced across the world – an indicator of global economic health – fell in April to the lowest level in more than 20 years, according to data compiled by Dealogic for Reuters.”[1]
This fact is striking when you consider that over the last 20 years, the global economy has endured significant disruptions, including the Great Recession, the COVID-19 Pandemic, global Inflation, a Regional Banking Crisis, two wars, and overall instability in the Middle East. Yet, from our current vantage point, the M&A market is at its lowest during the last two decades.
Veterans of the wine industry may recall the story of Inglenook and the Coppola Family’s stewardship of the Inglenook brand and the vineyard over the last 50 years.[2] To the right is a timeline of the winery’s and wine brand’s history.[3] I believe that this story is a perfect example of a “soft exit” for wineries looking to sell in a market with no buyers.
What is a “soft exit” in 2025?
If you are a willing seller in this market but struggle to find willing buyers (or at least those who aren’t seeking a discount on the adjusted value of your assets and no value for your intangible assets), what is the alternative? How about a “soft exit” where you retain key intangible assets? Unlike a hard exit, which typically involves a full, immediate sale of ownership with the seller stepping away completely, a soft exit allows for phased transitions and often retains the original owner’s involvement in some capacity for a negotiated time.[4]
Fundamentally, I see the vast majority of the value of a traditional winery business, encompassing operations and vineyards, in three key areas.
- Inventory – Bottled and bulk wine.
- Fixed Assets – Land, buildings, equipment.
- Intangible Assets – Primarily, brand, customer relationships in the form of wine club and mailing lists.
With this framework in mind, we consider a soft exit as the sale of assets in each bucket separately over an undetermined timeline.
Similar to Inglenook, when the business declined under corporate ownership, the brand and the estate were separated and not “restored” for another 36 years. While this example tells the story from a buyer’s perspective, we believe that a simple approach to this type of exit mirrors the Inglenook story.
- Inventory – Starting with the assumption that a buyer of this asset in its entirety is willing to pay a net present value equivalent to what they believe the individual assets will sell for over time, at a required rate of return, we suggest an alternative to simply keeping the business running until all the inventory is sold to your core customers.
This approach can help maximize the return for this asset by putting your wine in the hands of your best customers over the next two years; you can make this wind-down a celebration of the brand rather than a death march. Halting production and focusing on selling your existing inventory can be a more profitable alternative to accepting a discounted bulk sale. Consider the income from this wind-down as an “earn-out,” where, unlike the traditional deal structure, you can control everything from timing to risk.
- Fixed Assets – The key question here concerns the “value in use.” While the financial definition deals with the net present value of the cash flows[5], the range of value in a singular asset depends on how it is intended to be used. Simply ask yourself whether the vineyard is more valuable as a source of grapes for a specific brand or as a stand-alone vineyard based on its location, AVA, age of the vines, and the quality of its fruit. We suggest that there is value in choice, and limiting the use of the asset to a source of grapes for a specific brand’s estate bottle limits its value.
Also, as I learned from a prior experience, the value of a vineyard in a highly sought-after residential area may not be the highest and best use of the vineyard land. Treating the asset separately will allow for the flexibility to attract a buyer who sees the highest value for their particular use.
- Intangible Asset Value as an Option – While the current value of your brand remains on your label, all future use of that brand would remain in “hibernation” as you consider your next move or wait for the opportunity to see the brand resurrected by you or another buyer. Otherwise, you risk giving the brand away to a buyer who claims that a non-profitable brand holds no value. Consider this approach similar to the investment in an option. The value can go down to $0, but you aren’t giving away the upside. If you consider your brand to have value as a stand-alone asset, don’t include it in the sale of your operations unless the buyer is willing to pay a premium for it.
I use this approach all the time when a client tells me that an asset is worthless. My response is to make an offer of $1 for the asset, which yields an infinitesimal return on the worthless asset. Whether it is a floor or value that considers the avoidable cost of filing for the trademark protection or the future upside of applying a royalty rate to every dollar of revenue associated with the brand, these assets are usually worth something.
Takeaways:
- If you can’t find a buyer for everything today, consider looking at the business as a collection of assets that can be sold separately, ideally to those who value the assets the most.
- Your brand, customer relationships, and other intangible assets may hold hidden or future value.
The moral of the Inglenook story is that the Coppola Family paid more to purchase a dormant Inglenook brand than they did for the land associated with the winery in the heart of Napa Valley.
Exit Strategies has certified appraisers business from all industries with a strong expertise in the valuation of wineries and craft beverage companies, for tax, financial reporting, and strategic purposes. If you’re exploring your options or need a valuation to support a potential exit, contact Joe Orlando at 503-925-5510 or jorlando@exitstrategiesgroup.com. We’re here to help.
References:
[1] https://www.reuters.com/business/ma-deal-signing-hits-20-year-low-after-trumps-liberation-day-2025-05-06/
[2] https://www.winebusiness.com/news/article/298241
[3] https://www.guildsomm.com/public_content/features/articles/b/stamp/posts/inglenook
[4] https://www.linkedin.com/pulse/gradual-transition-exit-strategy-benefits-from-sellers-v4fpe/
[5] https://www.divestopedia.com/definition/5084/value-in-use
