Brewing a Cross-Practice Strategy to Optimize a Merger for Dogfish Head

THE CHALLENGE:

In 1995, Dogfish Head opened its doors as the smallest commercial brewery in the United States, brewing 12-gallon batches of beer to serve customers in its Delaware brewpub. Over the 24 years that followed, founders Sam and Mariah Calagione grew the operation into a major independent craft brewery.

As the popularity of the Dogfish Head brand grew, the craft beer landscape also changed. In recent years, faced with a crowded and competitive marketplace, many craft breweries have sold to international conglomerates. Consolidation has become the norm.

After pouring years of effort into building their company, the Calagiones were not interested in simply selling out to a big beer or beverage company. They wanted to find a partner that could help Dogfish Head expand its reach in a collaborative environment that promoted independence and creativity. In 2019, they decided to merge Dogfish Head with a larger – but still independent – craft brewer, The Boston Beer Company. Led by another legendary name in the craft beer space, Jim Koch, The Boston Beer Company is the maker of Sam Adams, Truly Hard Seltzer, Twisted Tea, Angry Orchard Hard Cider, Tura Alcoholic Kombucha and other popular beverages.

OUR OBJECTIVE:

To help negotiate the deal, the Calagiones reached out to the lawyer they had known and trusted from the days when Sam was selling beer by the growler at local festivals: Marc Sorini, the head of McDermott’s Tier 1-ranked Alcohol Regulatory Practice.*

The Calagiones tasked their team at McDermott – led by Tom Conaghan and Christine Kretkowski on the M&A side, Marc Sorini on the regulatory side, Patrick McCurry on the tax side and Jen Mikulina in intellectual property – with structuring a fair deal for the Dogfish Head brand and the Calagiones. 

The McDermott M&A and tax teams assisted in providing a tax-efficient stock-for-stock merger structure for the Calagiones. Jen Mikulina led a team of IP lawyers in separating from the transaction the rights to market the Dogfish Head brand outside of North America, preserving for Sam and Mariah the ability to continue to grow the Dogfish Head brand on their own in the future.  

The McDermott team was also fortunate to work alongside many friendly and familiar faces, including Dogfish Head’s chief in-house lawyer and a former McDermott regulatory associate, Shauna Barnes, and Boston Beer in-house counsel, Nichole Shustack, who is now a McDermott regulatory counsel.

THE OUTCOME:

Tapping our substantive cross-practice capabilities and deep understanding of the alcohol and beverage industry, along with our strong, longstanding relationships with both Jim Koch and the Calagiones, the McDermott team succeeded in facilitating a successful and smooth transaction.

As the only Tier 1 Alcohol Regulatory Practice in the country, the McDermott team proved to be ideally suited to provide the strategic advice and practical solutions necessary to advise on the integration of two successful brands.

In guiding Dogfish Head through negotiations, the cross-practice legal team relied on their experience and ability in navigating complex regulations, significant credibility with all parties and an excellent reputation with key industry players such as wholesalers, distributors and state and federal regulators.

Following the merger, Sam and Mariah Calagione remain involved in the business, with active day-to-day roles at the brewery and brew pubs. They operate the Dogfish Head division of Boston Beer and continue to bring their creativity and originality to bear in developing new, innovative products for the combined company. Sam will also be elected to the Boston Beer board of directors.

GO FURTHER:

For the client’s benefit, McDermott’s leaders in the alcohol and corporate practices teamed up with colleagues across the intellectual property, regulatory, environmental, tax, employee benefits and financial institutions groups.  

This top-shelf collaboration, tapping our cross-practice group brain trust, empowered the team to help Dogfish Head achieve its goal of finalizing the merger on ideal terms, exceeding the Calagiones’ expectations.

The transaction was recognized by M&A Advisor as the Consumer Staples Deal of the Year and won The Deal Award for Consumer, Retail, Food & Beverage Deal of the Year.

More details can be found in the press release about the merger.

*Marc Sorini retired from McDermott on December 31, 2019, after a successful 30-year career, during which he grew the McDermott Alcohol Regulatory Practice into the only Tier 1 Chambers-ranked practice in the United States. Following Marc’s retirement, Alva Mather, the former head of the Alcohol Regulatory Practice at DLA Piper, assumed leadership of the practice.