Current Crisis Causes “Sudden and Dramatic” Slowdown in M&A Activity

Dear Client: 

2020 started off as “incredibly active” on the M&A front, according to M&A advisory firm Zepponi & Company. But the pandemic and subsequent containment measures caused a “sudden and dramatic” slowdown across all bev alc categories. 

Since mid-March “projects that were being brought to the market have largely been put on hold, many (if not most) sale processes have been paused, and the limited amount of ongoing deal activity is restricted to transactions that were already under contract and in due diligence,” per a release from Zepponi & Co. 

During the SARS epidemic in the early 2000s, full containment took about nine months, and that total virus infection count was way below what we’ve already seen with COVID-19, around 8,000 cases across 29 countries compared to more than 1 million cases across 180 countries. As a result of SARS, in 2003 the number of M&A deals in China dropped by about 50%, according to Zepponi. 

“Given that experience, in the current market it appears likely that the monthly volume of beverage alcohol transactions will significantly decline until containment of the virus is achieved.” 

FROM SELLERS’ PERSPECTIVE. Most sellers have stepped back for now, and “those that remain in the market are largely those with the highest quality brands or assets that should be expected to extract a premium price regardless of near-term market conditions.” 

The firm believes that the recently passed stimulus bill along with the surge in off-premise alcohol sales, “suggest that most prospective sellers will exercise patience and wait for more normal market conditions before pursuing a transaction.” 

But, the current environment also could make sellers more amenable to selling partial ownership to gain short-term capital infusions. 

FROM BUYERS’ PERSPECTIVE. The firm breaks down buyers into four categories: domestic strategics; foreign strategics; financial investors; and high-net worth individuals. 

Domestically, buyers whose business skews largely towards off-premise will likely still have the funds to pursue M&A opportunities. 

Foreign strategics likely have issues to deal with on their home front, and not to mention the travel restrictions to the US make it more difficult to vet any potential acquisitions stateside. “On the flip side, these buyers may emerge from the crisis sooner than others and find themselves in ‘pole position’ to pursue deals as circumstances return to normal,” per Zepponi.  

There’s still plenty of dry powder, but we’ll likely see a reduced number of transactions from financial investors for a few reasons, according to Zepponi; 1) they’re focused on returns; 2) high diligence standards may pose challenges to new investments; and 3) they’re typically industry-agnostic.

LOOKING AHEAD. “As long as active containment measures remain in place, M&A activity will likely be limited to deals already committed or those with an absolutely compelling strategic rationale,” according to Zepponi. 

“Overall, present circumstances have forced producers to evaluate their branding strategy and sales capabilities, and to accelerate needed operational changes.” Indeed, many are already beefing up their online presence to stay connected with consumers. 

As such, “the M&A market will ultimately reward those producers who embrace these challenges as a time for self-assessment and improvement.” 


Total Wine & More typically fares well in the court system when it comes to making changes to state laws. But, the retailer’s lawsuit to strike down Connecticut’s alcohol pricing laws goes in the loss column after the US Supreme Court denied Total Wine’s request for a rehearing.

BACKGROUND. Total Wine filed a federal lawsuit against Connecticut in 2016, alleging the state’s practice of setting minimum prices on wine and spirits is “price fixing” and has “artificially high price levels” [see WSD 08-24-2016]. Total Wine targeted three provisions it said violated the Sherman Antitrust Act; price discrimination prohibition, minimal retail resale price, and the post and hold provisions. 

In June 2017, US District Judge Janet Hall dismissed the case “because these provisions constitute hybrid constraints that receive rule of reason scrutiny and therefore cannot be preempted,” per court documents. Shortly after, Total Wine filed an appeal. But the appeals court decided to uphold the lower court’s ruling, so the retailer sought an en banc review in March, asking the full Second Circuit to rehear the case, but that was denied as well. 

The retailer then decided to take its case to the US Supreme Court. Southern Glazer’s Wine & Spirits filed an amicus curiae brief in support of Total Wine’s petition earlier this year [see WSD 01-09-2020]. 

SC DENIES HEARING. This morning the Supreme Court denied Total Wine’s writ of certiorari, refusing to hear the case. 

As a result, the Second Circuit’s decision is upheld, keeping Connecticut’s alcohol pricing laws intact. 

As we understand it, the only way to change the law now is through the legislature. 


Australia-based Accolade Wines is selling its US wine brands, including Geyser Peak, Atlas Peak, XYZin and Outlot, to 2 Bears LLC. The deal is expected to close this summer, reports Press Democrat. 

The sale does not include the Geyser Peak winery and tasting room in Healdsburg. 

You may recall, US private equity firm Carlyle Group acquired Accolade in 2019 for $770 million [see WSD 04-04-2018]. 

Until tomorrow,

“Out of difficulties grow miracles.” – Jean de la Bruyere 

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