Transitioning ownership in family-owned food and beverage companies

The process of transitioning a family-owned business can be a complex undertaking. Each private food and beverage company is unique which means there are many different factors to consider prior to transitioning ownership. Questions that may arise include:

• Are the family and company ready for the transition?
• What are the main goals for the business in regards to business continuity and value enhancement?
• How will family values and principles transition with the ownership of the company?

During a recent panel discussion, select executives of family-owned food and beverage companies that recently faced ownership transitions shared their succession paths and views on the current opportunities for middle-market companies. The panelists included:

• Tom Walzer – CEO – Saco Foods, LLC
• Dimitri Pappas – Founder/Owner – Orchard Solutions
• Jonathan Del Re – CEO – Lacas Coffee Company

In an excerpt from Challenges of growing and transitioning a private food and beverage company, the panelists discuss factors they and their business’s families considered while transitioning ownership.

How did you or your family think about transitioning ownership?

Dimitri Pappas: The first factor was considering what is best for the business. We wanted to sell the business because we believed another buyer could help take it to the next level. We were also concerned about the fact that the juice category, which had been growing through the 1980s and the 1990s, was mature by the time we sold.

The second factor was considering the family. My uncle had recently passed away and my dad was ready to retire. So, what was best for the business and what was best for the family were the considerations that we looked at before selling the business. But these considerations are going to be different for different businesses. At this point, I have dealt with several dozen family businesses, and one takeaway is that family businesses are like snowflakes – every business and every family is unique, and the right solution for each business is likely to be unique.

Tom Walzer: With Saco Foods, the hardest part for me was making sure I never let down our founder, and my business partner, Ray Sanna. I needed to make sure we picked a capital partner who had our ethics, our vision and our time table. We were looking for a partner with patient capital. With Benford Capital, we found a partner with the same vision and culture to help us grow.

Baker Tilly Capital: Jonathan, in your case, you bought Lacas Coffee Company. What were some of the thoughts and areas that were important to the sellers with regard to the sale?

Jonathan Del Re: Naturally, the sellers wanted a compelling valuation. But they also had other concerns. This was a third-generation family company, with two of the three sellers being part of the Lacas family. The owners also sincerely cared about the teams they had built. Reasons for the sale were pretty clear in that two sellers wanted to keep working in the company and the third – the CEO – wanted to pursue other interests. The CEO’s desire to leave created the need for a liquidity event and caused the transaction. His departure also created the need for a new leader, as the two owners who wished to remain were deeply immersed in specialized roles within the company.

With the purchase of Lacas, my goal has been to create value -- make the business bigger and more profitable over time and position it for the future. We have invested heavily in improving our capabilities, via new people, technology production equipment, marketing and branding, etc. We have continued to further diversify our business mix. Revenue and production volume are up significantly and we have more than doubled our EBITDA. So far, we have created significant value over time. But, our constant challenge is to keep doing this into the future.

If you are going through an ownership transition with your family business and need guidance, please contact Gary Plaster. For more information on this topic, or to learn how Baker Tilly Capital specialists can help,  contact our team.

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