Interest rates may seem like a macroeconomic issue far removed from day-to-day brewery operations, but for craft brewery buyers and sellers, they play a critical role in valuation, deal structure, and overall transaction success. Whether you’re considering selling your brewery or evaluating an acquisition, understanding how interest rates influence the market can help you make better strategic decisions.
How Interest Rates Impact Craft Brewery Buyers
For buyers, interest rates directly affect the cost of capital. Most brewery acquisitions rely on a combination of equity and debt—often SBA loans, bank financing, or seller notes.
-
Higher borrowing costs: When interest rates rise, monthly debt service increases. This reduces cash flow available for reinvestment, expansion, or operational improvements.
-
Lower buying power: Buyers may qualify for smaller loans, limiting the price they can pay or forcing them to seek additional equity partners.
-
Stricter underwriting: Lenders tend to tighten credit standards in higher-rate environments, placing greater emphasis on consistent cash flow, clean financials, and experienced management.
As a result, buyers become more selective, focusing on breweries with strong margins, diversified revenue streams (taproom, distribution, events), and demonstrated resilience.
How Interest Rates Affect Craft Brewery Sellers
For sellers, interest rates influence both valuation and the size of the buyer pool.
-
Valuation pressure: Higher interest rates can compress valuation multiples as buyers adjust their return expectations to account for increased financing costs.
-
Deal structure shifts: Sellers may be asked to carry a note or accept earn-outs to bridge valuation gaps, especially when buyers want to conserve cash.
-
Timing considerations: In lower-rate environments, more buyers can access capital, often resulting in stronger demand and more competitive offers.
That said, well-run breweries with strong brand identity, loyal customer bases, and efficient operations can still command premium valuations regardless of rate cycles.
Interest Rates and Deal Structure in Brewery Transactions
Interest rates don’t just affect price—they shape how deals get done.
-
Seller financing becomes more common: In higher-rate environments, seller notes can help close transactions while providing sellers with ongoing income.
-
Equity contributions increase: Buyers may need to invest more of their own capital, reducing leverage but increasing long-term stability.
-
Earn-outs gain traction: Performance-based payouts can help align buyer and seller expectations when future cash flow is uncertain.
Understanding these dynamics allows both sides to negotiate from a position of strength.
What Brewery Owners Should Do Now
For brewery owners considering a sale, interest rates reinforce the importance of preparation:
-
Clean, well-documented financial statements
-
Strong and predictable cash flow
-
Clear growth opportunities and cost controls
For buyers, now is the time to stress-test assumptions, model multiple financing scenarios, and focus on operational efficiency post-acquisition.
Final Thoughts
Interest rates are a powerful force in the craft brewery M&A market, but they don’t tell the whole story. Quality businesses with strong fundamentals continue to attract interest in any rate environment. Buyers and sellers who understand how interest rates affect valuation, financing, and deal structure are better positioned to navigate the market successfully.
At American Craft Brewery Advisors, we help buyers and sellers navigate these dynamics to achieve successful outcomes—no matter where interest rates stand.