Sale of Cowgirl Creamery to Emmi underscores critical role of succession-planning
No matter what lifecycle stage your business is in, experts say it is never too early to plan for a transition.
Succession-planning is a systematic process for making a smooth business transition when current officers and founders consider relinquishing their roles or ownership of the company. It includes finding new leadership and an organizational structure that will carry on in the future.
Cowgirl Creamery, an artisan cheese-maker, was acquired in May 2016 by milk processor and dairy company Emmi AG of Lucerne, Switzerland. For co-founders Sue Conley and Peggy Smith - both in their 60s - as their Point Reyes Station-based company with 95 employees approached its 20th anniversary, they felt it was time to consider options for the future.
Today this business has two production facilities, two retail shops, Sidekick Restaurant in San Francisco's Ferry Building and a distribution arm - Tomales Bay Foods - that also handles a variety of other brands.
According to media reports and company statements at the time of the sale, the company's road map focused on the benefits of an acquisition or merger with a larger corporation. Among other critical goal-setting factors they wanted to know:
Is there potential for capital infusion and increased distribution capacity?
Would the firm's model remain centered on its craft?
How has the potential suitor worked with other acquired entities, particularly local ones?
Could the business be run in the same way after a merger?
Will our creamery locations remain in Sonoma and Marin counties?
Could we benefit from a global firm's long-standing expertise in our field?
Will our uniqueness and differentiation cache be maintained?
Is there respect for the value of organic production and sustainable agriculture?
Will loyal customers be scared?
Will a buyer understand and honor our cheese-making traditions and craft?
Can principals stay involved in the business after a merger?
Will a merger strengthen the existing brand?
When considering a buyer such as Emmi, fact-finding revealed that answers to a majority of their concerns were not deal-breakers. But they showed that the Swiss firm's philosophy was in alignment with their own objectives.
To help provide a platform for the future, they both wanted their creamery to remain in Sonoma and Marin. They will. And after the merger, the agreement called for Conley to stay on as president and Smith as vice president.
A vital issue for Cowgirl Creamery founders was finding a firm willing to finance future expansion, since they did not wish to use internal capital. Partnering with Emmi gave them access to funds needed to build another facility in Petaluma. The expanded creamery is planned to open in September, enabling Cowgirl to increase production and reintroduce popular cottage cheese that has not been available for some time, while also being able to develop and introduce other products.
The partners found that Emmi fit their model closer than other potential buyers and that this firm is like-minded about the value of organic production and sustainable agriculture. Emmi's global reach was seen as a plus for promoting their brand and marketing their cheese internationally.
“We invented the way we make cheese without engineers and dairy scientists, traditions that started in Europe, and now we will actually have experts to help us refine our processes and help create new cheese products,” Conley told the San Francisco Chronicle in a May 16, 2016 story. “This company understands the craft and traditions of cheese making. We're confident that the merger will strengthen our business and allow us to operate as before without altering our high standards and by continuing our support of local dairy farmers.”
Simon Inman, partner of Santa Rosa-based Carle Mackie Power & Ross, LLP, was legal counsel for the Cowgirl Creamery transition after the deal was made with Emmi. One of the speakers at a May 23 Business Journal event on succession-planning, he talked later about the ways to begin thinking about succession and assess a buyer:
Richard Stone, co-founder and chairman of San Rafael financial-planning firm Private Ocean, also was a speaker at the May 23 event. Stone later discussed the succession-planning process he experienced.
“After deciding it would be in the best interest of all of our stakeholders, we went through a succession-planning process at Private Ocean from 2007 to 2015 that also resulted in having good defense against the competition,” Stone said. “Our field is staffed with highly intelligent people. If they are not given an opportunity to advance in their careers, and be in a position to be offered an equity position, they could leave the business. Ensuring their future helps to sustain us today and for the long term.”