Dan Kenary, current Harpoon CEO, is no newbie to the family.
He and ex-CEO Rich Doyle went to Harvard together (they were freshman-year dorm-mates). After graduating in 1982 Kenary took a trip to Europe that opened his eyes to beer possibilities. A few years later in 1985, Doyle said he was putting together a research report for business school on the microbrewing industry, and that report later became their business plan for Harpoon Brewery. By June of 1986 they were pounding the pavement, offering locals a taste of the future. “That’s how we did it,” Kenary says. “Beers are a perishable product, and we just kind of went bar to bar having people sample our [fresh] local beer.”
Nearly 30 years later, foreign craft brewers that once guffawed at American beer are now looking to the U.S. for tips on getting new breweries going. “When we started there were maybe 100 breweries here,” Kenary says. “Now there are over 3,000. It’s wild.”
Two-and-a-half years ago, in winter/spring of 2012, Kenary had been speaking with nearby companies about the what it takes to create an Employee Stock Ownership Plan (ESOP). That lead to an introduction to a Chicago exec who ran an ESOP advisory firm, which they hired to see how an ESOP could work at Harpoon. Doyle, now in his mid-50′s, told Kenary he was ready.
But Kenary told him he wasn’t looking for a transaction at the time, so Rich spearheaded looking into the options for selling the company, and explored bringing in a strategic investor who could partner with a foreign brewery. They had numerous inquiries from different breweries and several investment banks about making an investment in the company. Lots of people wanted to buy the company, with about 15 breweries that were in the mode of making acquisitions, both large American breweries and international entities eyeballing the craft beer business here.
“I said to Rich ‘What feels right to me is this ESOP, so let me dig into this more’.”
Doyle was working with one banker who had put a proposal together and said he could sell it, but as a company they never got to the point of being in a position of selling it off to the first high bidder with a satchel of cash.
“Once you put yourself in play, all bets are off. And I was really determined not to let that happen.”
ESOPs are quite complicated and heavily regulated. The latter is for the benefit of the employees and Harpoon’s new ESOP trust would buy shares from the selling shareholders. Those shares would then go into a trust to be held in an account allocated to the employees each year as the ESOP trust pays back the ESOP loans borrowed from several banks required to set it all up. Still, Kenary says, it remains a confusing scenario, even for some employees.
“People are like, ‘Oh, you’re selling them the shares?’ No. We’re giving them the shares [instead of] leveraging up the business and taking dividends out just to make a few people rich,” he says. “We’re leveraging the company up to give our shares to the employees.”
Market Basket, you may want to take note.