The Challenges of Selling a Micro-Brewery and Event Center

Abstract

Sweeney Brewing Company (SBC), a family-owned business in St. Paul, Minnesota, is contemplating its sale. The family has hired a team of MBA students to help determine the appropriate sales price based on a multiple of sales or EBITDA. The possible sale of the entity is contingent upon addressing the individual or joint sale of three intersecting businesses: (1) the brewery; (2) the taproom; and (3) the event center. The financial objectives for this sale were set forth by the grandson of the SBC founder, CEO William (Bubby) Sweeney. The sales price is built around the financial projections for the next three years and the continued growth of the business, despite a plethora of microbreweries in the area.

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Resources
Appendix: Sweeney Brewing Company Financial Statements
Statement of Comprehensive Income for the Period Ending December 31, 2019 (USD)

December 31, 2019

December 31, 2018

Revenues

5,269,750

4,851,250

Cost of sale

2,017,578

1,823,950

Gross profit

3,252,172

3,027,300

Selling & administrative expenses

948,555

897,481

Other expenses

105,395

97,025

Finance costs

42,960

61,200

Income before tax

2,155,262

1,971,594

Income tax expenses

646,579

591,478

Net income

1,058,683

1,380,116

Statement of Equity for the Period Ending December 31, 2019 (USD)

Capital stock

Retained earnings

At December 31, 2017

3,500,000

2,100,890

Net income

1,380,116

Stock issued

Dividends paid

(27,602)

At December 31, 2017

3,500,000

3,453,403

Net income

1,508,683

Stock issued

Dividends paid

(30,174)

At December 31, 2018

3,500,000

4,931,913

Statement of Financial Position at December 31, 2019 (USD)

December 31, 2019

December 31, 2018

Assets

Current assets

Cash

2,145,048

1,356,676

Accounts receivable

89,000

84,000

Inventories

838,817

784,760

Prepaid expenses

32,000

28,000

Total current assets

3,104,865

2,253,435

Investments

Marketable securities

3,900,000

3,460,000

Bond receivables

1,000,000

1,000,000

Total investments

4,900,000

4,460,000

Property, plant & equipment

Land

100,000

100,000

Buildings

900,000

900,000

Equipment & machinery

3,700,000

3,700,000

Accumulated depreciation

(2,530,000)

(2,530,000)

Total property, plant & equipment

2,170,000

2,400,000

Intangibles

Patents, net

660,000

675,000

Trademarks, net

450,000

475,000

Total intangibles

1,110,000

1,150,000

Total assets

11,284,865

10,263,435

Liabilities

Current liabilities

Accounts payable

581,580

544,100

Accrued liabilities

146,000

234,000

Current portion LT debt

171,840

244,800

Total current liabilities

899,420

1,022,900

Long-term (LT) debt

Bank indebtedness

1,200,000

1,800,000

Lease obligations

232,000

240,000

Total LT liabilities

1,432,000

2,040,000

Equity

Capital stock

3,500,000

3,500,000

Retained earnings

5,453,445

3,700,535

Total equity

8,953,445

7,200,535

Total liabilities & equity

11,284,365

10,263,435

Statement of Cash Flow for the Period Ending December 31, 2019 (USD)

December 31, 2019

December 31, 2018

Operating activities

Net income

1,508,683

1,380,116

Depreciation expense

230,000

230,000

Amortization expense

40,000

40,000

Change in accounts receivable

(5,000)

(6,000)

Change in inventory

(48,288)

(5,200)

Change in prepaid assets

(4,000)

1,000

Change in accounts payable

33,480

25,843

Change in accrued liabilities

(88,000)

(82,000)

Cash provided for operations

1,666,875

1,583,759

Investing activities

Purchase of securities

(440,000)

(350,000)

Cash used for investing

(440,000)

(350,000)

Financing activities

Payment on bank debt

(672,960)

(500,000)

Payment on lease obligation

(8,000)

(8,000)

Payment of dividends

(30,174)

(27,602)

Cash used for financing

(711,134)

(535,602)

Net increase/(decrease) in cash

515,741

698,156

Cash, beginning of the year

1,629,307

411,388

Cash, end of the year

2,145,048

1,109,544

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