The Bottom Line:
As CRO of craft brewery Modern Times Beer, Stapleton Group achieved a full recovery for the company’s secured lenders and helped save more than 160 jobs by auctioning the business as a going concern for $20 million. The successful sale closed just one week before the lenders were expecting to liquidate the company for $1.5 to $2.0 million, which would have resulted in a write-down exceeding 90% for the secured lenders and total losses for downstream lenders.
“We are very pleased with the outcome given the dire situation we walked into – a company unable to fulfill customer demand, lenders threatening liquidation, and a C-suite of just one, newly-hired executive after management walked out the door.”
Mike Bergthold, Managing Director
Keys to the tremendous outcome were:
- Collaborating with restructuring counsel and Modern Times’ newly appointed CEO, Jennifer Briggs, to convince the senior secured lender to provide over $1 million in working capital to keep the company afloat for the 13 weeks needed to complete a going-concern sale.
- Ms. Briggs’ ability to quickly build trust with and unite employees after years of cultural challenges, thereby keeping production online during the restructuring.
- An investment banker familiar with the timeline, technicalities and complexities of a distressed company sale.
- Strong interest from competitors to buy the company, culminating in a competitive auction among strategic buyers.
The Business Issue:
The craft brewery industry exploded after Constellation Brands paid $1 billion for Ballast Point in 2015. Microbreweries such as Modern Times Beer popped up across the nation, with inexperienced management teams pursuing rapid growth without sufficient operating systems and controls, heavy debt loads, and poor financial acumen. A viral #MeToo campaign highlighting a hostile work environment in the microbrewery industry further compromised the efficacy of Modern Times’ management team, causing its CEO/Founder to resign in May 2021.
A seasoned industry expert, Jennifer Briggs, was recruited to join Modern Times’ board of directors in late 2021 to deal with the company’s toxic cultural issues. She was appointed CEO in December 2021. Ms. Briggs uncovered the depth of the company’s financial problems and that its employees, creditors, and other stakeholders were in the dark.
Facing an illiquid and culturally troubled company, Ms. Briggs pursued a discovery process resulting in the abrupt resignation of the entire C-suite, leaving her without financial or senior executive support. She took quick action to remedy the situation:
|+ 13 Weeks||
Challenges & Corrective Actions
During the discovery process, Stapleton and Ms. Briggs identified that:
- Historical financial statements were seriously in arrears
- Accurate budgeting and forecasting were non-existent
- Previous management had obtained very expensive financing to fund losses rather than address the company’s fundamental problems
Stapleton expanded its scope of work to serve as fractional CFO, add an interim controller and add a senior financial analyst to bring the financial accounting current and create an accurate multi-year projection model – essential to determining restructuring options and marketing the company for sale.
New Life for Modern Times Beer
By presenting practical restructuring options projected to yield substantially more than the company’s liquidation value, the restructuring team successfully convinced the senior secured lender to increase its exposure to the illiquid company by about 15% to stabilize operations through a going-concern sale in exchange for a voluntary “receivership lite.” This strategy proved extremely effective for all parties involved:
- Sales increased during the period.
- Maui Brewing provided a stalking horse bid for $7.62 million
- A bidding war ensued between Brewery X and TRU COLORS, ending with two bids at $20 million or more.
- Brewery X was awarded the company when the court ruled its final offer was the highest and best bid.