Rural Seed Company Provides Allied's Latest Harvest

June 2013 | Kansas City Business Journal | James Dornbrook       Download PDF      Print

Allied Business Group's latest transaction, the sale of a rural agricultural firm called Star Seed, shows the versatility of the company as it continues add services and people.

The Overland Park-based investment bankers represented the ownership group of Star Seed, a niche seed provider in Osborne, Kan., that focuses on products that are not in direct competition with giants like Monsanto and DuPont Pioneer. Allied Business Group conducted a workshop for business owners considering strategic options, and Star Seed co-owner hired the firm to conduct an appraisal of his business.

"It was really a steppingstone," said Tim Skarda, founder and managing director of Allied. "The company value wasn't quite where the owners needed it to be. So we consulted with them, providing a checklist of items that they could work on to increase the value, which they did. Their business continued to perform with both revenue and profit growth. In spring 2012, they were at a point where it made sense to take the company to market. We engaged them and started the process. Ultimately, a year later, we sold the company."

The buyers were a group of three private equity firms: Gladstone Investment Corp. of McLean, Va.; Dallas-based Broadgate Capital; and Denver-based Highline Equity Partners.

"It was an interesting, highly complex transaction," Skarda said. "But so far it seems to have worked out well. The three of them have an agreement about how they will work alongside our client, who will continue to own a portion of the company going forward."

Allied typically handles business transactions in the $3 million to $30 million range, and Star Seed was a midsize transaction for the company. The deal was Allied's first big score for 2013, after closing three deals in December. Skarda said Allied has three more deals in the works. He expects mergers-and-acquisitions activity this year to be as strong, if not stronger, than 2012.

"Other than the capital gains tax rate increase, everything else related to market conditions is very favorable," Skarda said. "You still have baby boomers who are either at or past the time of retirement, and they are wanting to exit. Financial performance of their companies is still strong. You have private equity buyers out there. Credit markets are very favorable right now, and lenders are willing to extend credit in deals to 2007-2008 levels, which was really the height before the downturn. That is allowing buyers to extend into the higher value range areas."

The strong market prompted Allied to hire four people in the past year, including Cory Miser, who is leading an all-new dispute consulting and due diligence practice. The dispute consulting involves serving as expert witnesses in valuation-related court cases. The due diligence practice focuses on making sure paperwork related to deals is accurate.

Allied also remains opportunistic on the hiring front, looking to land experienced deal makers and support people. Skarda added 1,000 square feet to Allied's office in Overland Park at the end of April, so there is room to hire a few more people in the future.