Yakima Chief and HopUnion were two separate companies headquartered in the Yakima Valley in Central Washington, processing hops to serve the needs of the beverage industry. Owned by hop growers, they operated like cooperatives but with different end markets. Yakima Chief was the volume hops processor and distributor to large production brewers like Anheuser Busch, while HopUnion produced “designer” hops targeting the growing craft beer industry.  

The owners realized that there were improvements that could be achieved in combining the two companies to allow more efficient use of facilities, as well as cross-selling of capabilities to each company’s end markets as craft beers grew in size and importance in the industry. As is often true in our work, what sounds simple on the surface was not; the two processors shared some (but not all) common owners, but in different proportions, and through a cavalcade of entities. It was not immediately apparent how each individual shareholder would benefit from the combination. 

We were brought in to develop a framework for exchange of interests to create a merged entity, develop an integrated business plan, and arrange financing for the new entity. The most challenging aspect of the merger was to gain common agreement on a fair relative valuation between Yakima Chief and HopUnion and their affiliated entities, so that for each individual shareholder, exchanging interests in one business for ownership in the combined entity was perceived as fair. We held multiple meetings with groups of owners to gain buyoff on a methodology that considered the changing product flow and operating economics of the new combined entity, rather than an arbitrary valuation number; the intent was that the mechanism could be understood and fair, and the actual numbers would become the output of a fair process. Once the rationale for why the business would have value was brought to light, the relative contributions of the businesses became easier to digest and accept.  

Once the merger was complete, we could turn our attention to the financing. Financing required education of lenders on the logic of the merger, the expected improved economics, and why the new management team would be able to accomplish the integration. It required a large enough vehicle to buy out parties who ultimately did not decide to reinvest in the merger, as well as to finance a highly seasonal working capital requirement. Ultimately, the consolidated entity, rebranded as Yakima Chief Hops, emerged as one of the four largest hop distributors in the world with meaningfully improved margins once the integration was achieved. We were thrilled to have contributed to the creation of a stronger, more efficient, more stable Yakima Chief Hops, and that they asked us to continue on to participate on their board was an honor.