Why James of Vino Di Copa was Right (Not Wrong) to Turn down the offers from the Shark Tank

There was a lot of negative commentary against James Martin of Copa Di Vino on twitter and even on the Copa Di Vino facebook page.  The main sentiment among the negative commentary was that James Martin of Copa Di Vino “blew” his second chance in his repeat appearance on the set of Shark Tank.

But, do the numbers agree that he blew his chance?

First we’ll break down the numbers, and then describe how it played out.  So let’s break this down in order of presentation on the show:

Analyzing the Offers & Business Valuations:

The introductory pitch has the First Offer from James Martin of Copa Di Vino: $6,000,000 Business Valuation ($300,000 for 5% Equity)

Then First Counter Offer from Kevin O’Leary which is for a $1,176,471 Business Valuation ($600,000 for 51% equity in I.P. Only) [This offer is the same offer from the previous appearance from last season]

Then Kevin O’Leary follows with a serious offer: $2,500,000 Business Valuation ($300,000 for 12% equity).

To which James Martin of Copa Di Vino counteroffers at $3,750,000 Business Valuation ($300,000 for 8% Equity)

To which the Sharks reply with a $2,000,000 Business Valuation ($600,000 for 30% Equity).  This is *$500,000* LESS than Kevin O’Leary’s real offer.  This happens even after the Sharks acknowledge that the believed that James Martin’s was justified in his Business Valuation for Copa Di Vino.

The difference in the Sharks Final Offer and James Martin’s serious counter offer is actually ($3.75 MM – $2.0 MM)/(2.0 MM) = 87.5%.  James Martin was wise to turn down the Low-Ball offer for Copa Di Vino

When 12% – 8% Does NOT equal 4%  (It’s Actually 50%)

James Martin of Copa Di Vino made it clear that Kevin O’Leary serious offer of $300,000 for 12% ($2.5 Million Dollar Business Valuation) was roughly half of what the Wine Industry Resale Multipliers justified.  As such, James Martin of Copa Di Vino counteroffered at $300,000 for 8% equity.  Now let’s clear up some confusion, the counter is NOT for a Seemingly small Sounding 4% difference (12% – 8%), it is actually a 50% difference.  The Business Valuation of $300,000 at 8% equity is $3.75 Million Dollars.  $3.75 Million Dollar is 50% greater than $2.5 Million!!!

So what do the Sharks do, they LOWER their offer to a $2 Million Dollar Business Valuation ($600,000 for 30% Equity) even though they acknowledge that James Martin does have a justified valuation for Copa Di Vino.

Looking into the actual numbers of the Business Valuation behind the serious offers and counteroffers and it is apparent that James Martin of Copa Di Vino was well justified in turning down the offers and walking away in complete control of his business.

He’s making money, and he is making it on his own terms in his own vision.  He deserves kudos for this!

So even though the Sharks low-balled James Martin of Copa Di Vino by reducing their initial offer, Martin is the one getting the majority of the blame for supposedly ‘Blowing’ his second chance on the set.

#SharkTank Copa de Stupido Don’t fight over 15 percent. You will recovery that difference in the life of the company. @mcuban #takethedeal

— Puck Off (@PuckOff326) April 14, 2012

Now that we have gone through the numbers of the offers and the Business Valuation it is clear to see that Sharks likely had no expectation of making a deal with James Martin for Copa Di Vino, especially once they reduced their offer and Made it sound like they were offering a better deal because they said it was for more cash upfront.

Just an FYI to those who are not familiar with James Martin of Copa Di Vino’s first appearance on the Shark Tank:

Kevin O’Leary presented an offer for the Intellectual Property of the singe serve packaging for $600,000 for 51% equity which translates to a Business Valuation of $1.176 Million Dollars.

In the return appearance Kevin O’Leary opened with the same offer, even though James Martin of Copa Di Vino had proved his concept of keeping the patented single serve bottling to his own product line with projected $5 Million in current year sales.

As soon as it became apparent that James Martin had done his homework on the valuation of his overall business and was 100% intent on keeping the entire business together and not separate the Intellectual Property Kevin O’Leary made his serious offer which was $300,000 for 12% which translated to a $2.5 Million Business Valuation.  This was still less than half of James Martin was asking for Copa Di Vino, which is $6 Million Dollar Business Valuation ($300,000 for 5% equity).

As we saw on the show, a deal did not pan out, mainly because the Sharks and James Martin did not see eye to eye on value.  Each side had legitimate justifications for their offers, The Sharks were discounting for the value they brought to the table, and Martin had expert valuation data on his side.

Want to read recaps of previous Shark Tank episodes? Click here to see the entire collection episode recaps, all of them with business lessons you can take away from each pitch.

For More information on how Just Elementary, Inc, Business Brokers can help you with Business Valuation Matters for your business contact our Client Care Manager Sonia Chhabra at  (888) 926-9193 or email cs@justelementary.com