The answer to should Eberhart sell is in the title. Eberhart has built a fantastic, respectable business (although I disagree with his decision to antagonize the Yakuza) and clearly found a following in Japan after relaxation of regulations around wine sales. He fundamentally understands the customers' buying habits and has now installed a savvy general manager in Michael Khoo. Every good business needs more capital but how you source that capital a la the Robert Mondavi case matters. I believe the key to a successful raise is in protecting against the downside.
In this case, he knows literally nothing about these investors. The only thing worse than a mid-tier investor is an unknown one. Even without donning a tin hat, there are multiple nightmares that become reality. The worst scenario is that these investors are effectively a front or shell for some competitors eager to buy and kill off the business. Another likely scenario is that these investors are hobby investors who enjoy the appeal of wine but may destroy value instead of creating it. Either way, what is described as a private-equity style majority buy-out should be carefully vetted, diligenced and scrutinized. Based on my personal finance experience, I would expect that a business that has shown clear growth, margin expansion and market opportunity would excite and attract private investors in the U.S., despite the Japanese incorporation. Japan represents a stable, mature international market that many are familiar with and should not require onerous covenants or terms for a potential investment.
No comments:
Post a Comment