Summer 2022 Newsletter

Cascadia Private Capital Provides “Off-Menu” Transaction Option for PNW Business Owners

When you spend years building a business—making countless decisions to overcome challenges and reach stability—no decisions are more significant than choosing a path for an ownership transition or taking on capital to grow. Upon considering the more traditional offerings, such as a private equity investment or sale to a strategic, you may find yourself wishing for an “off the menu” option. That could mean maintaining the business as a standalone entity. Maybe you’d like to avoid debt. Or perhaps local ownership is critical to the company’s future growth.

Cascadia Capital created its Private Capital Group (“CPC”) for companies seeking creative transaction approaches not available in typical processes. We recently had the privilege of closing two transactions under this umbrella—a pair of customized solutions that met the unique needs of two Pacific Northwest businesses.

In a recent confidential transaction, we partnered with a leading independent sponsor and a company’s existing ownership to recapitalize the business to provide liquidity to the founding shareholder and growth capital for organic and inorganic growth opportunities.

In another situation, CPC assembled a group of strategic investors to acquire 100% of OVS Equipment Solutions (now Oregon Equipment Sales), a regional agricultural equipment dealer that was being divested from a private equity backed business. The investor group—including family offices, industry partners, and Cascadia principals with experience in the agricultural equipment sector—partnered with the strong existing management team to execute the transaction.

Both transactions leveraged the core capabilities of Cascadia Private Capital:

  • Industry knowledge;
  • Creative solutions;
  • Experienced and flexible capital

Our CPC team works to lead this type of “third-way” transaction, leveraging patient capital and our firm’s relationships with family offices and other long-term investors who want to back mature companies that generate income and wealth for business owners in the Pacific Northwest.

Through our relationships, we encounter many business owners for whom the usual choices aren’t a good fit. Some own businesses that are critical suppliers to giant corporations that are pushing the business to grow or expand beyond the comfort level of the original owners. In those cases, our role is to find sources of capital and additions to the management team who can lead that company to its next stage with minimum risk.

We also encounter situations in which family owners or founders are seeking capital for stakeholder liquidity and next-level growth while maintaining minority or majority ownership and operational involvement but have reservations or hesitation around traditional private equity or institutional investors.

And then there are the situations (as with OVS Equipment Solutions) where private equity firms want to divest locally headquartered companies that may no longer align with their strategy. From our perspective, that’s a great opportunity to re-establish local ownership—and we have a relationship network of high-net-worth individuals and family offices with flexible investment horizons to bring the right partners to the table alongside our team.

In contrast to independent sponsors and private equity funds who may run the same playbook on every transaction, Cascadia Private Capital constructs each transaction collaboratively and from the ground up:

  • Initial Consultations: We want to get to know the business’s owners and other key stakeholders. Once we understand the history of the business, any relevant family ownership dynamics, market positioning, and the enterprise’s relative strengths and risk areas, we can better assess what the future might look like and think creatively about how to achieve critical growth objectives.
  • Ideation: In most situations, our team can whiteboard multiple transaction structures, taking into account current ownership and the company’s strategic and financial objectives for the future and giving owners a range of paths and options to consider.
  • Introductions and Networking: Once we collaboratively agree on an approach and structure, our professionals leverage their networks to introduce possible co-investors and assess their fit with ownership and interest in a potential partnership.
  • Ongoing Involvement: Cascadia takes an equity position in all CPC transactions and remains involved with the business as a trusted advisor following the completion of the transaction. Cascadia involvement can range from participation on the company’s board, acting as an outsourced corporate development arm that seeks add-ons and other strategic transactions to support the business, or other consultative work that advances the interests of the business and its shareholders.

We believe the CPC approach holds particular appeal for companies in mature, stable sectors, including but not limited to manufacturing, transportation & logistics, distribution, and oil & gas—companies that generate consistent cash flows across market cycles.

Businesses in these traditional sectors can often feel unloved in a more traditional M&A process. However, these companies can be well positioned to achieve attractive, accelerated growth with the right structure and group of investors who can bring domain expertise, strategic and operational insights, and have a similar long-term growth focus as the current ownership. That’s where deal magic can really happen!

We encourage any business owner who wants to assess a full range of options for their business to reach out—we are always quick to respond and eager to learn more.

Summer 2021 Newsletter

As we enter the second half of 2021, the deal market continues to get hotter.  Higher prices and robust activity are drawing out even more sellers who want to take advantage of the opportunity.  We believe the boom in growth and activity happening how is a supercycle that could last several years – through at least 2022 and probably into 2023.

In our Summer Newsletter, we review the key factors fueling the current supercycle and what this means for business owners and entrepreneurs.  We also highlight specific sub-sectors that are skyrocketing and seeing increased investor and buyer interest.

The 2021 M&A Boom is Only Halfway Complete

Price Checking the Market Can Help Company Owners Choose the Best Path

In January, we shared our thoughts on why and how 2021 could create the Perfect Storm to Consider a Sale for company owners. We projected peak valuations in the M&A and capital markets—married with elevated recovery, tax, and business cycle risk—would provide the impetus for many to consider their strategic alternatives.

Having lived through a period of significant market turbulence, many business owners became acutely aware of how much risk they were shouldering, which opened their eyes and minds to a transaction. Midway through 2021, our thesis has borne out, translating into an M&A and capital formation boom with further room to run.

Our team has had the privilege of supporting 35 clients in M&A and capital raising efforts over the last 12 months. One might naturally attribute any year-over-year growth in 2021 to the pandemic’s temporary pause on dealmaking in 2020, but this year’s unique drivers have made it an even more active year than 2019.

Select Client Spotlights

Click through the images below to learn more about a selected grouping of the clients our team has supported in the last year. To see all of our recent transactions, click here.

White Hot Valuations for Growing Companies in Select Industries

Transaction multiples for many companies across our core growth sub-vertical coverage areas have increased materially relative to the pre-COVID environment. In many sectors, value appreciation of 20-30% is common. In some cases, it is even more elevated, especially in emerging growth sectors where first-to-market advantages and intellectual property protection are exceedingly valuable.

Companies that fared well through the pandemic and exceed the quality bar for a critical mass of counterparties are among an elite group, and the laws of supply and demand have taken hold. Private equity investors, sitting on $1.9 trillion [1] of uninvested capital, have been aggressive in attempting to outbid strategic buyers, who are often too constrained to quickly react to shifting market forces. After a pause to focus on internal operations, strategics also broadly reignited M&A efforts this spring, and the S&P 500 has $2.7 trillion [2] of cash on balance sheets.

Investors have always had robust interest in strongly performing businesses, but growth, specifically profitable growth, is even more valuable and sought-after now than it was before the pandemic. The relative value of growth has increased significantly in a market where the tide is not lifting all boats equally. Those with a compelling narrative and supporting financial performance are best positioned to maximize value in 2021.

The Tax Change Window of Opportunity

We’ve previously shared how business owners might quantify the potential tax dollars at stake in evaluating the timing of an M&A transaction this year.

Efforts to drive capital gains higher by the Democratic party have been persistent since the Obama Administration, but success has been elusive. However, all signs point toward change under the Biden administration, and many states are enacting their own forms of capital gain taxation, creating a second layer of potential burden. It is worth noting that there is no history of retroactive implementation of capital gains increases.

While the final rate of increase at the federal level may or may not be as high as the proposed 39.7%, the tax risk has not been higher in recent history, and the incremental dollars at risk have not been this elevated since the 1950s.

While this is likely not the only decision-driver for company owners, it should be on the minds of every owner as a material consideration in timing a potential transaction, given that any new paradigm is likely to persist for the next four years.

No Guesswork Required: Peace of Mind in a Market Check

In our conversations with company owners, we often hear some version of this sentence: “I hear valuations in my industry are at an all-time high and taxes may increase significantly, but what does that mean for me?”

If an owner is on the fence, how can they gauge the potential opportunity before them and determine whether this is the year? We recommend making these decisions with data, which is the basis for a ~15-30-day process we call a “Market Check.”

After some initial discovery with an owner, our team can prepare a limited scope of information to share with a thoughtfully selected group of potential buyers or investors. This surgical strike gathers real-time data to help company owners understand actual interest levels and gain more clarity around current valuation. Knowing that investors would value your company at $180m instead of $150m provides the inputs needed to evaluate the alternative option of waiting until you’ve achieved additional organic growth.

Our team conducts these checks for owners without the expectation that the owner moves forward with a transaction. This check is simply our way of helping you collect the appropriate data to inform your decision-making. Ultimately, this leads to a decision in which you can feel completely confident, even if that decision is to keep working away at your business without transacting for many years—or at all!

How Much Time is on the Clock?

There is still time to complete a transaction this year if you get the ball rolling imminently. If you are committed to closing a transaction in 2021, we would suggest you begin the process by the end of June to ensure a higher probability of closing by year-end and avoid unnecessary tax risk.

While this year’s boom has created conditions for peak valuations and a window of opportunity on the tax front, it has also caused congestion in the M&A service provider system. We’ve recently been hearing from deal lawyers and Quality of Earnings providers that they are reaching capacity for the year or are raising their rates due to supply and demand imbalances. Waiting until Q3 to begin might leave you in a service provider bind without the appropriate resources to complete the transaction.

Which Verticals are Enjoying Post-COVID Peak Valuations?

The Cascadia team has long held deep expertise and transaction experience in niche segments across a variety of industries. This focus allows us to provide the most innovative and expertise-driven service for our clients. It also enables us to align the right individuals within our networks across industries of shared focus.

In response to the changes in the market, we have doubled down on our focus on growth, and each banker has identified the most attractive sub-verticals within their industries—those experiencing high transaction activity levels and peak valuations. To see which sub-verticals our bankers have highlighted as growth areas, click here.

Learn How These Dynamics Apply to You

Our team is here to answer any questions you may have about your capital raising and M&A alternatives, whether you’re a Cascadia client or not. You can find our contact information here.


[1] Preqin (As of 5/2/2021). Retrieved from
[2] Bloomberg:

The SPAC Boom Has Changed the Market

SPACs offer public market access to high-growth private companies

Most private business owners with an eye toward raising capital know that over the last year, Special Purpose Acquisition Companies (SPACs) have exploded into the forefront. The SPAC structure—often seen now as the preferred path to the public markets for private companies with a fitting story—has significant benefits like price certainty, full values, speed, and relative ease of transaction.

Also known as “blank check companies,” the SPAC sponsors raise a blind pool of funds from private investors with the intent of using the proceeds of the IPO to acquire a company in a specific industry or sector and taking it public. The SPAC structure has existed for decades, but conditions over the last few years have conspired to drive a new surge in interest that has been referred to as a “Blank Check Boom.” There has been a pronounced sentiment shift toward SPACs as a viable path to the public markets. There is broad consensus that the product’s durability is apparent and sustainable.

SPACs can be an appealing route to the public markets for companies that prioritize valuation certainty, coupled with speed and relative ease of transaction closure, which are absent from the traditional IPO process. Because SPACs are mergers rather than public listings, companies merging with SPACs are also allowed (for now) to disclose the sort of earnings projections that are barred by securities regulators in traditional IPOs. This forward guidance emboldens the institutional investors—those in the PIPE (Private Investment in Public Equities) as well as the SPAC IPO investors—to believe in the inherent value of the business that may not otherwise be evident from the historical financial profile.

Investors in the SPAC IPO are placing a bet that the SPAC sponsor will find an appealing merger target at an attractive valuation. It is a relatively low-risk investment, as 100% of the IPO proceeds are held in trust and are fully redeemable at any time up to the de-SPAC merger vote. If the investors do not like the deal the SPAC sponsor and target company ultimately agree to, they can redeem their shares in full, plus interest. In almost all cases, these investors are making their redemption decision alongside a PIPE investment completed to bring further capital at a stated value at the time of the de-SPAC transaction. This validation/authentication of the deal by new, often fundamental (long-term and non-momentum driven) investors is becoming increasingly critical in driving deal volume.

De-frothing the Market?

The Securities & Exchange Commission (SEC) is considering new guidance to dampen and regulate the growth projections SPAC target companies can provide to SPAC IPO and PIPE investors. The new regulations under consideration follow April 2021 SEC guidance querying the appropriate accounting treatment of warrants issued by SPACs to the IPO investors. Their concern is whether certain warrants should be treated as liabilities (and not equity instruments) for accounting and reporting purposes. The SEC’s evaluation of these considerations has caused a significant pause in market activity. Only a few accounting and law firms dominate the SPAC market, and their bandwidth to address the issue by changing the financial statements to meet new and evolving SEC guidance is highly constrained.

Those moves have cut into some of the frothiness the SPAC market experienced over the fall and winter of 2020—when every day seemed to bring a new announcement that some celebrity or other was launching a SPAC, and many SPACs were well oversubscribed at the time of their IPOs. April was by far the slowest month for new issuances this year, and SPAC share performance is trailing the S&P 500 year-to-date. It seems retail investors have taken the brunt of the losses, and the financial traders (hedge funds) are largely leaving the PIPE market. The capital market landscape for SPACs is rapidly evolving.

Despite this relative pause in the SPAC market, we view the SEC’s moves as a net positive over the long term. Closer scrutiny shows the SEC takes SPACs seriously—and it may pave the way for a more mature long-term market growth period. We anticipate the window for new SPAC IPOs will re-open in the coming months, as investors digest the impact of the SEC’s changes and adjust expectations accordingly. New and evolving fundamental investors are coming into the PIPE market (replacing the hedge funds that were in it largely for the financial trade), which is a very good sign for the viability of the de-SPAC target company as it exists into the future as a public company.

Robotics, Automation, and AI: A Particular SPAC Focus

Cascadia’s Robotics, Automation, and AI (RAAI) group advises private business owners in these high-growth sectors, which enjoy significant interest from would-be SPAC acquirers. Several recent SPAC transactions are evidence of the robust investor appetite for innovative RAAI companies, and good examples for business owners considering this path to understand.

In February, Massachusetts-based Berkshire Grey—a maker of robotics and automation solutions for retailers, eCommerce, and grocery warehouses—announced that Revolution Acceleration Acquisition Corp. was targeting it for a SPAC merger that could value the business at up to $2.7 billion.

Other recent SPAC activity in the space has targeted remote-surgery pioneer Vicarious Surgical and exoskeleton manufacturer Sarcos. We believe this sector, which is rapidly growing and has relatively high capital requirements, is very well suited for the SPAC product. We expect to see increasing activity in RAAI SPAC transactions.

A Ticking Clock

For business owners curious about the SPAC deal dynamics and structure, or the viability/suitability of selling their company to a SPAC, our team at Cascadia Capital has put together some key points to consider.

It is important to know that SPACs operate on a tight timeline—once a SPAC IPO is raised, it typically has two years to complete an acquisition (the de-SPAC transaction). SPAC shareholders may vote to extend the acquisition window, and shareholders also get final approval over the de-SPAC.

The ticking clock tends to drive an accelerated process once a SPAC identifies a target company. A typical timeline for negotiation, approval, and closing of a de-SPAC is three to six months.

During that time, negotiations and due diligence typically take four to six weeks and involve all the business, financial, and legal due diligence that is routine in any M&A transaction.

With most/all de-SPAC deals, there is an additional capital raise event via a PIPE transaction. This fundraising effort typically involves collaborative work between a SPAC sponsor and the target company’s management team in their interactions with the PIPE investors.

The remainder of the time to close—anywhere from 12 to 24 weeks—is required to complete and file the appropriate proxy/registration/disclosure statements with the SEC and prepare the company to operate under public company disclosure requirements.

Given the tight timetables involved, there are a handful of critical considerations we believe private company owners should keep top of mind.

  • Valuation: Agreeing on an asset’s value is at the heart of every transaction. In SPACs, as in many M&A transactions, we are seeing earnouts and other structural arrangements being used to bridge valuation gaps. These may involve the target company receiving additional shares if, for example, the company meets key operational or financial goals post-transaction and/or the share price reaches and maintains ascribed levels. Remember, though, that SPAC investors are usually motivated by a belief that the SPAC’s management team will drive success once the company is public. Their bet is on the value the combination will unlock.
  • Transaction Risk: Unlike traditional M&A transactions, recourse for a failed SPAC transaction tends to be limited. Most SPAC buyers have no post-close recourse against shareholders in the target company. Similarly, reverse-termination fees are uncommon in SPAC transactions; the funds raised through a SPAC’s IPO are held in trust for the sole benefit of the SPAC’s shareholders.
  • Closing Hurdles: Some target companies negotiate “fiduciary out” clauses that allow them to terminate the merger (usually for a fee) if a better offer materializes. Also, the fact that SPAC shareholders may redeem their shares in connection with the vote to approve an acquisition can introduce uncertainty near the close, as those redemptions must be drawn from the same funds the SPAC holds in trust to close the deal. Last-minute renegotiations of deal terms may be needed as SPAC sponsors try to get a deal approved with minimal redemptions.

Reporting Readiness

While the public reporting requirements are lighter for a company participating in a de-SPAC than one pursuing the traditional IPO track, they are still significant. Complying with them is a major effort in the months leading up to the close.

  • Before close, the SPAC and its target company must file an S-4 registration/proxy statement or tender materials with the SEC, which requires two or three years of target company financial statements audited to the standards of the Public Company Accounting Oversight Board (PCAOB). PCAOB standards are more stringent than those of the American Institute of Certified Public Accountants (AICPA) that most private companies follow. To the extent a private company is considering a SPAC transaction, it behooves it to prepare its financials in accordance with PCAOB standards.
  • A second, post-close filing (required within four days of the close) is the so-called Super 8-K, which mandates three years of PCAOB-standard financials.
  • Post-close, the now-public company will have to meet all public company standards for accounting, compliance, internal controls, and reporting. These include public company corporate governance policies and procedures. This requires significant investment, planning, and implementation and should be commenced well in advance of the de-SPAC closing.
  • The Environmental, Social, and Governance (ESG) metrics under which the marketplace now evaluates public companies represent a particular hurdle for many new public companies. ESG compliance is no longer a check-the-box exercise—a World Economic Forum white paper published in late 2020 recommended that public companies around the world report on no fewer than 21 “core” and 34 “expanded” metrics of adherence to standards of “Governance, Planet, People, and Prosperity.”

More to Know, More to Come

For more in-depth background on SPACs, we highly recommend this FAQ-style deep dive into the topic prepared by our friends at Perkins Coie.

While much of the recent mainstream media coverage of SPACs has focused on some of the more hype- and celebrity-driven aspects of the surge, we are long-term believers in the structure. The boom that started in 2020 has revealed significant public market demand for investor access to companies that have high-growth potential but lack the infrastructure or wherewithal to run the risky gauntlet of an IPO. We believe a de-frothed SPAC market is here to stay.

Plug In: Energy Sector Updates

Sustainability + Energy Transition + CleanTech M&A

Coming in Hot to 2021: Sustainability/CleanTech Investments/M&A in 2020
2020 proved to be a banner year for the thematic clean-energy and broader CleanTech industries. Indexes soared to new highs with a continued positive outlook, M&A was robust with attractive multiples driven by insatiable investor appetite.

Three key factors drove 2020’s deal activity:

  • Improving economics (solar and wind power are now among the most cost-competitive sources of new electricity capacity additions in the U.S. and abroad)
  • Record-breaking growth of multiple clean-energy sectors during the global COVID-19 pandemic (shining a light on the resilience of wind and solar markets, in particular)
  • The expansion of green stimulus plans across Europe, Asia, and the U.S.

Sector Spotlight: Energy Storage
The pandemic brought the broader economy to a halt, but the energy storage industry clearly didn’t get the memo. Instead, developers made 2020 the biggest ever for battery installations in the U.S.

More capacity is going into homes than ever before, helping families make better use of rooftop solar investments and keeping the lights on during outages. Large-scale projects reached new heights with utilities across the country using batteries to solve numerous grid problems and planning far more into the near future.

Solar and wind development projects with collocated storage are also providing a compelling opportunity. Project backlog is at an all-time high, with gigawatts of storage coming online.

Looking Forward: Carbon Sequestration
Carbon capture and storage (CCS) is widely seen as a critical technology for reducing atmospheric emissions of carbon dioxide (CO2) from power plants and other large industrial facilities—major sources of greenhouse gas emissions linked to global climate change.

Global capacity for CCS is on track to total 116 Mtpa by the end of 2020, according to the report. This is a 33% year-on-year increase, and a 100%+ increase on 2017 levels [3]. Various market players are joining forces to complete large-scale CCS facilities and rapidly commercialize the technology.

Encouraging signals and financial backing by governments worldwide are expediting industry pace as novel and compelling technologies continue to emerge to meet growing calls for change. We see a lot of interesting dynamics evolving in the commercial and industrial categories, as well as in the large-scale end of the market.

Sector Spotlight: Industrial Internet of Things (IIoT)
Overall, IoT dealmaking remained strong in 2020, driven by a flurry of consolidation in the healthcare, transportation, manufacturing, and wireless sectors. The total value of IoT acquisitions rose to nearly $69bn from $8bn in 2019 [4].

M&A activity was concentrated in a handful of verticals as businesses sought to digitize. Spurred by the global health crisis, healthcare technology-related transactions led in volume, with 24 acquisitions totaling over $19bn, or 20% of all deals last year. Investors showed sustained enthusiasm for the transportation sector, with 13 transactions in commercial and consumer transportation totaling over $5.8bn [4].

Enterprises continue to face a variety of complex challenges. Digital technologies—like industry 4.0 and the industrial internet of things (IIoT)—offer huge potential in enabling the fast implementation of many novel, value-adding use cases. Early adopters of the technology have an advantage in effectively navigating turbulent waters.

A Closer Look: Supply Chain Management & IoT
Before the COVID-19 pandemic, many companies implemented a lean supply chain, which prioritized cost reduction and minimized global product inventory. The pandemic exposed vulnerabilities in the lean supply chain approach, forcing companies to increase local inventory levels and diversify their suppliers. Firms utilized IoT solutions to control supply chain events across various modes of transportation and multiple logistics hubs.

[1] Pitchbook
[2] IHS Markit
[3] Global CCS Institute
[4] 451 Research

Wine Industry Leaders Tapping Public Markets—Further Fueling a Robust M&A Cycle for the Beverage Industry

Two of the wine industry’s leading premium producers—The Duckhorn Portfolio and Vintage Wine Estates (“VWE”)—have recently announced public offerings, a dynamic that is expected to continue to fuel an already robust M&A environment for the beverage industry in 2021 and beyond. The wine segment hasn’t seen a pure-play IPO since Crimson Wine Group in 2013.

Robust market dynamics and strong retail investor appetite have rewarded Duckhorn with a market cap of over $2 billion and it is expected VWE (which was recently acquired by a SPAC), will also garner a compelling public market valuation and an attractive currency to continue their acquisition strategy. Furthermore, these two producers’ ability to tap the public markets will provide meaningful validation of the attractive return potential for private equity investors, who have historically been averse to investing in the wine industry.

COVID-19 turned many wine producers’ sales channels upside down in 2020, with the decline in on-premise sales hitting small and mid-tier producers especially hard. In tandem, wildfires (and the associated smoke taint) damaged or devastated vineyards, production facilities, and properties across California and Oregon. Despite these challenges, and now with the gradual rollout of the COVID vaccine shining a light toward the end of the tunnel, the market is well-positioned for a significant rebound in M&A activity as earnings improve and buyer appetite increases.

The long-awaited completion of the Gallo/Constellation transaction may also signal a return to the M&A market for two of the industry’s largest suppliers, and both VWE and Duckhorn have cited M&A as a cornerstone of their future growth strategies.

Overall, the current public and private market dynamics create a compelling opportunity for small and mid-tier producers to consider M&A or an investment strategy to accelerate growth, find a strategic partner, or provide an opportunity to transition the business and obtain liquidity at an attractive valuation.

Public Filings Provide Window into Divergent Yet Successful Strategies

Vintage Wine Estates Acquired through SPAC Bespoke Capital

Special Purpose Acquisition Company, Bespoke Capital, announced the acquisition of VWE on Feb. 5, 2021 for a purchase price of $690 million, with an additional $50 million in future potential consideration. The acquisition provided VWE with a significant deleveraging event ahead of the anticipated public offering. “At some point, it takes a lot of capital to be in the wine business, and we needed more capital to continue our growth,” cited VWE CEO Pat Roney.

Notably, the SPAC that acquired VWE was initially raised to acquire cannabis brands. Given the turmoil in the cannabis market and the number of SPACS that had originally targeted the space, this could suggest that additional capital pools could turn their sights to beverage alcohol.

VWE has a track record of continuously and opportunistically acquiring and rolling up smaller brands, and has historically been a more value-driven buyer. In 2018, the company raised $75 million from leading agriculture-focused investment firm AGR Partners, which provided the company with a meaningful growth capital investment to continue to invest in building its portfolio to its current scale. We expect that with a public currency and deleveraged balance sheet, VWE will become an even more aggressive acquirer, becoming more competitive on higher-quality assets and brands of scale.

VWE has a broad portfolio across price points, varietals, and regions—spanning California, Washington, and Oregon. The company will likely continue to look at a wide array of assets that can leverage its value proposition, including sales and marketing infrastructure, supply chain synergies, and back-office support. The company’s infrastructure provides an attractive alternative for some smaller brands that want to focus on growing and winemaking instead of the commercial aspects of selling wine through wholesale and direct-to-consumer channels.

Duckhorn’s Focused Playbook May Expand Private Equity Interest in Wine

Duckhorn completed its $300 million IPO on March 18, 2021, issuing 20 million shares of common stock for an initial offering price of $15 a share, with shares soaring over 20% on the debut, translating to a market cap of over $2 billion. The IPO provides TSG Consumer Partners—Duckhorn’s majority owners who acquired the company in 2016 for approximately $600 million—with a compelling return.

With the IPO complete, Duckhorn will become a benchmark for how private equity investors can create meaningful value in the beverage alcohol category with a premium brand portfolio, laser-focused distribution strategy, and strong management team. Historically, the wine industry’s exposure to agriculture and the associated risks, as well as the significant working capital investment required to age inventory, have limited broader private equity interest. However, we believe that with both the VWE and Duckhorn transactions, we will see a significant increase in private equity and institutional investor interest.

Under TSG’s ownership, Duckhorn successfully executed on a growth plan to expand the portfolio to multiple brands and varietals while also staying true to the company’s core luxury strategy. Management has developed a best-in-class sales and marketing team that has successfully activated the portfolio across the retail, direct-to-consumer, and on-premise channels, and has had tremendous success growing its more moderately priced Decoy brand ($20-$35/bottle) in recent years, which has provided a “an incredible funnel for people to luxury wines,” said Duckhorn CEO Alex Ryan.

Duckhorn also completed two accretive acquisitions in recent years, including highly regarded Sonoma Pinot Noir producer Kosta Browne and Central Coast Pinot Noir producer Calera. Ryan told MarketWatch following the IPO, “Growth will continue to be internal,” but that the company would take a “very diligent and careful” approach to exploring acquisitions. “There are a lot of great wineries out there…maybe some will fit our culture and growth profile,” Ryan said.

In any such acquisitions, it is unlikely Duckhorn would stray too far from the luxury and ultra-luxury categories, likely looking for trophy assets of reasonable scale, varietals to round out its portfolio, or bringing Oregon assets into the fold to complement its existing Washington and California portfolio.

Savoring the Opportunities in 2021

With a robust public market environment and revenues for many beverage suppliers expected to rebound strongly this year with on-premise re-openings, we believe it is an opportune time for small and mid-size suppliers to consider M&A or an outside capital raise as a way to enhance supply chain and route-to-market capabilities and capture additional scale with a strong strategic or capital partner. Potential sellers evaluating the market should also consider possible capital gains tax increases looming in 2022. Attractive brands and cash-flowing assets will have the opportunity to achieve attractive valuations from investors during this unique period while capturing maximum proceeds from a tax perspective.

The Cascadia team has extensive industry experience and is in regular contact with investors and strategic buyers across the beverage industry. Please do not hesitate to reach out as you consider your M&A and capital-raising alternatives.

Spring 2021 Newsletter

Recent Energy Storage Valuations Point to Key Trends in the M&A and Capital Markets

As wind and solar energy become increasingly competitive against traditional methods of power generation, there is a burgeoning need for scaled energy storage—both in front of and behind the meter. As such, energy storage has become the darling of the renewable energy and cleantech worlds today, resulting in company valuations based almost entirely on expected future profits. Numerous notable M&A transactions embody these trends—including some advised by Cascadia in recent weeks.

Energy Storage Trends & Growth Drivers

Decreasing Costs of Renewable Energy

Over the past two decades, renewable energy has become more mainstream—in residential, commercial, industrial, and utility-scale contexts—and is becoming cost-competitive with traditional power generation. In some cases, advances in technology have made renewable energy less expensive than its conventional counterparts.

On the storage front, plummeting battery costs have stemmed from a global focus on the battery supply chain. This includes giga-factories producing lithium-ion batteries globally, driving down cost and increasing the efficacy of cells. This further increases the financial attractiveness and subsequent increase in deployments/use cases, driving the demand and growth cycle.

Transportation Electrification

The electrification of transportation is one of the biggest drivers of the movement toward renewable energy and is feeding demand for storage options. The electric vehicle (EV) market is the largest foreseeable market for batteries in the next 20 years , driven by consumer sentiment, mass adoption by automotive OEMs, and state and local governments’ incentives. In fact, by 2030, EVs are expected to account for 30% of the global market share, with full price parity compared to ICM (Internal Combustion Motors).

Widespread Adoption of Stationary Energy Storage

Energy storage is expected to experience record growth in 2021, as annual installations will exceed 10 GW (gigawatts) in annual storage installations for the first time, increasing from 4.5 GW in 2020. The most significant contributors to this growth are the United States, mainland China, and Australia, which are predicted to contribute a combined 4.5 GW of the increase.

Behind-the-meter storage is also expected to increase as demand charge management, rate tariffs, and time-of-use arbitrage drive consumer choice in favor of renewable energy storage options. Favorable regulatory and incentive environments—both those currently existing and those anticipated under the Biden administration—further promote growth.

These trends are driving M&A and capital-raising opportunities for companies across the energy storage value chain. While the current momentum remains on opportunities in front of the meter—providing grid-scale storage for utilities and municipalities—there is also growth in both industrial and residential opportunities behind the meter.

Notable Deals in the Space

Valuations in energy storage are frothy across the industry, particularly relative to the nascency of the market. Investors are betting big on a macro level: assigning attractive valuations for companies that are currently losing money and are not expected to be profitable for five years or more. As renewable energy continues to mature as an industry, energy storage is clearly viewed as an inseparable component of that growth.

In a deal advised by Cascadia Capital, Powin Energy, a leading battery energy storage company serving the utility-scale market, received a growth equity infusion of more than $100M from Trilantic Capital Partners and Energy Impact Partners.

In late 2020, Fluence, a leading company in the grid-scale energy storage space, received a commitment from the Qatar Investment Authority for a $125M minority stake at a valuation above $1 billion.

Additionally, in late 2020, in a SPAC transaction, Stem, Inc. merged with Star Peak at a valuation of approximately $1.35 billion. Stem’s AI-driven smart grid technology helps support green forms of energy by charging during hours of low usage and providing backup when demand is high. The merger provides Stem an estimated $608 million in gross proceeds to invest in its emerging technology.

These three transactions represent capital flowing to leading companies in the energy storage space at very strong valuations.

Looking Ahead

The rapid expansion of the energy storage market is poised to be the most significant growth story in the larger energy value chain, impacting sub-verticals from utility-scale and C&I (commercial and industrial) to electric vehicles and consumer products. Energy storage companies looking to capture the massive M&A market opportunity will need to focus primarily on innovation, commercialization of products/services, and scale.

The current wave of large, utility-scale development will continue as grids build capacity. This wave is supported by more nuanced efforts behind the meter, largely driven by state regulation and subsidies for buildings and microgrids.

Energy storage companies are developing new battery technologies (anode, cathode, electrolyte, various chemistries) as well as other energy storage approaches (e.g. thermal, mechanical, kinetic, hydrogen, pumped hydro, etc.). The companies with the most deployments and well-established use cases will be most attractive to investors.

With a track record of deals in the energy storage industry, Cascadia’s expertise provides a lens through which to examine how these trends may impact your company’s M&A and capital-raising alternatives. Please do not hesitate to reach out to our team to discuss.

Energy Storage Deals Led by Cascadia Capital’s Energy Team


Key Trends & Predictions for Robotics, Automation & Artificial Intelligence

The Fourth Industrial Revolution is underway, and the breadth and depth of its impact are shifting paradigms across all industries on a global scale. Robotics, Automation, and Artificial Intelligence (“RAAI”) technologies are upending traditional business practices, resulting in permanent market shifts.

Today, Cascadia’s RAAI practice group – one of the nation’s first emerging growth investment banking practice groups dedicated to the sector – released a special industry report with key industry trends, predictions, technology landscapes highlighting established and emerging leaders, and exclusive interviews with notable participants within the industry.

Click Here to View Report:  Robotics, Automation & Artificial Intelligence Key Trends & Predictions – Winter 2021

This report is the first in a series of thought pieces the Cascadia RAAI team is producing to identify themes and share actionable insights applicable to business owners, investors and advisors, and those interested in how RAAI technologies are infiltrating and impacting all aspects of our economy.

If you would like to discuss any topic in further detail or if we can be helpful in any way, please do not hesitate to contact us or visit our industry page to learn more.

Trust. Experience. Independence. Results.

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