Preparing to Sell Your Alcohol Business — Part IV: Unique Structures and Innovative Models
This is the fourth article in a series on how to prepare your alcohol business for sale. The first three articles in this series address licensing, labeling, and distribution. In this installment, we’ll look at special considerations for alcohol businesses with unique structures or innovative models, as these businesses should be prepared for extra scrutiny during the due diligence phase of a potential acquisition.
Part IV: Unique Structures or Innovative Models
If your alcohol business features an Innovative Model or Product, you should expect potential buyers to want to dig deeper into the regulatory details of your unique operations or product during due diligence. Negotiating how much information your business will provide to a potential buyer (which is likely your competitor) regarding unique elements of your business can be fraught. The buyer will want to be confident that it can operate your business without regulatory issues post-close, while you will want to keep proprietary details confidential. Prior to soliciting buyers, carefully consider what details you are willing to share, and under what circumstances. If you have any correspondence with regulators or specific approvals regarding any element of your innovative model or product, you should compile these to potentially share or summarize during due diligence.
If a Third-Party Service Provider is integral your business model, you should be prepared to share the details of the relationship with potential buyers. Although businesses which provide marketing or fulfillment services to alcohol companies are often unlicensed, their activities are attributable to your license and are still subject to alcohol regulations. Some states have specific rules governing third-party provider (TPP) relationships, while others caution that an alcohol licensee may not hire a third-party to engage in any activity that the licensee either needs to do directly or would not be permitted to do directly. Sellers should be prepared to provide any TPP contracts during due diligence, and potential buyers may have questions regarding how your business vetted the alcohol regulatory compliance of the service provider.
Common wrinkles that we see during the due diligence phase are issues relating to Tied House Laws and Unique License Combinations. State laws typically limit a business from operating or owning an interest on multiple tiers of the three-tier system; however, there are frequently a variety of exceptions in each state. For example, most state’s tied-house laws prohibit alcohol producers from owning an interest in a retailer, but there are usually exceptions for tasting rooms and/or retail sales at the production facility. Other exceptions may be more specific and only available in a few states. Often, potential buyers are interested in businesses that they can expand. If your business’s licensure hinges on a very limited state tied-house exception which is not available in other states, that may limit the value of your business.
Further, unique license combinations can be very fragile, and eligibility can be lost by the addition of other licenses. If the potential buyer has a different set of licenses than your business, the laws may not allow the buyer to hold all the licenses simultaneously post-close. After compiling your business’s licenses, it is best to work with your regulatory attorney to map out what licenses your business uses for which operations and identify any licenses that are not required for your operations. As an alcohol business’s operations evolve over time, sometimes it finds that it holds licenses that were once necessary but are no longer needed. Identifying those licenses is helpful for potential buyers, as knowing which licenses can be abandoned at close will help them with their analysis of license compatibility.
October 5, 2026
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