laska Native corporations (ANCs) acquire companies for a variety of reasons, from expanding their existing portfolios in specific industries to entering new lines of business. But unlike many companies that look at such investments simply as a way to improve their bottom line, ANCs tend to focus on how these companies fit not only within their financial picture but into a corporate culture that embraces tradition, history, the environment, and the long-term sustainability of its shareholders.
“When we began restructuring our company eight years ago, we wanted to find businesses and industries that fit with who we are as Native people—that fit our region and our homeland of southeast Alaska,” explains Sealaska CEO Anthony Mallott of the company’s focus on land, food, and water. “We already had a land business; the food and water portions were built through a very specific acquisition process.”
“Primarily, we bring businesses in because of very strong cultural fit,” says CEO Ron Unger. “We look for management teams in prospective acquisitions that feel connected to our Alutiiq shareholder mission and who understand that if we do well, we do good for our Alutiiq community. That has to be something they are drawn to; they need to share a mission that is larger than just making money.”
In some cases—such as in Afognak Native Corporation’s recent purchase of the Brown Jug liquor chain—the fact that the 80-year-old company had Alaska roots and would be able to provide shareholder-hire preference played a large part in its decision.
Bering Straits Native Corporation’s (BSNC) purchase of Northwest Construction, which also has a long history in the state, focused on the fact that the company would provide opportunities to enhance shareholder value.
“When you are a Native corporation, you need to think decades out,” says Doug Smith, BSNC senior vice president. “Very few Native corporations are in buy-and-sell mode; it’s more of a ‘buy and build a durable economic engine for the future’ mode. Companies are looking at the long game to keep them relevant and competitive in the long-term.”
“The one thing that ties all of our business lines together is ocean health; it is all interconnected,” says Mallott, adding that one of the company’s objectives is to address the negative effects of climate change.
The corporation acquired a majority stake in Gregg Drilling in 2018, a marine drilling and geotechnical services company located in Southern California that has expertise in water remediation and coastal erosion issues. It also purchased CS Marine in 2020, which expands its capacity for ocean cleanup work and contributes to creating renewable energy sources, such as ocean-based wind turbines.
To build its seafood platform, Sealaska worked on creating a domestic supply chain of high quality, sustainable Alaska seafood processed in America focused on domestic sales. It purchased a minority interest in Independent Packers Corp. (IPC) in 2016, followed by a majority stake in Odyssey Enterprises in Seattle in 2016. Odyssey Enterprises merged with Orca Bay Seafoods in 2017.
“With Orca Bay Foods as the core of our industry platform, we began looking for a company in Alaska to acquire because we wanted something closer to home,” explains Mallott. “Because we already had three food acquisitions and a growing pipeline of businesses on the water side, we decided to acquire a minority stake in Barnacle Foods in April of this year.”
In addition to strong management, a steady cash flow, and a good financial history, Sealaska was impressed by the small company’s innovative products. Located in Juneau, Barnacle is the first food business to create and manufacture products with bull kelp, including salsas, hot sauces, jams, and jellies.
“They take a raw product and create high-quality, healthy products,” says Mallott, adding that kelp can also help counteract some of the negative effects of climate change.
“We looked at more than 300 companies, not just in Alaska, but globally,” he adds of the company’s search for water-based acquisitions. “Who makes money and who doesn’t? Who has real cash flow? Whose assets are overvalued? At the end, it came down to who had the value that we were looking for and who understood what it meant to be part of a company that represents the Tlingit, Haida, and Tsimshian people and their ties to the water and land.”
“Primarily we look for acquisitions that are in our proven sectors, and we also look for targets that can enhance but may be tangential to what we are already doing,” says Unger. “Finding growth opportunities in diversification is paramount as a ‘forever corporation’ so that we can provide benefits to our shareholders in perpetuity.”
Koniag owned the majority interest in Open Systems Technologies—a company focused on commercial IT work for Fortune 1000 and mid-market customers—for the past eight years and purchased the remaining interest this year. It also invested in Glacier Services, folding it into their energy and water business sector.
“This deepened and broadened our capabilities in the oil and gas industry, providing more value to customers,” says Unger, adding that Koniag’s focus on stable, endurable financial growth and performance includes making acquisitions that help their existing business interests grow.
Afognak Native Corporation also looks at acquisitions with the goal of diversifying, which led to their $21 million purchase of the Brown Jug liquor store chain in June.
“We have target acquisition profile criteria that includes rate of return, risk tolerance, asset evaluation, and sale price, as well as how the purchase will fit into our core technologies and business expertise, and long-term profitability for shareholders,” explains Executive Vice President Alisha Drabek. “In the case of this particular acquisition, we also looked very closely at how it would match with our core values and established strategic plan, as well as the other businesses in our portfolio.”
Because this line of business was separate and distinct from its prior business portfolio, Drabek says that Afognak’s executive and operations teams spent many months performing due diligence, including analyzing the human relations aspect, regulatory compliance, public relations, IT, and the financial point of sale systems, among other factors.
“We needed to be able to sustain the integrity of the Brown Jug business and to support it separately from our government contract subsidiaries,” she says.
Bering Straits Native Corporation | Northwest Contracting
“This purchase makes us a central player because we are buying a reputable brand with a longstanding Alaska history,” says Drabek. “Because 60 percent of our shareholders live in Alaska, we wanted a commercial acquisition that offered opportunities for us to grow shareholder hire preference as well as bring in operational revenue. Roughly 2 percent of our portfolio was commercial revenue before; now it will be closer to 12 percent.”
In addition to being a low-risk financial investment that is also highly resistant to recession, Drabek says that the acquisition aligns with the corporation’s community outreach and responsiveness goals.
“The Brown Jug regularly invested in philanthropic efforts in the twenty-one communities where it had stores, and this provides an opportunity for Afognak to align with and to grow a positive community reputation,” she adds. “Even though the legislation didn’t pass, the fact that they also supported a 5 percent liquor tax as the right choice for social responsibility also sits well with our core values.”
BSNC also looked to an Alaska-based business to help them diversify outside of government contracting. In May, it acquired Northwest Contracting, an industry leader in pavement marking and grooving. With the state’s reliance on the oil and gas industry, the corporation was looking for an investment that provided stability in uncertain times.
“The service line they are in is needed, even when there’s a downturn in the economy,” says Smith, adding a significant portion of funds for road work come from the Federal Highway Administration.
BSNC plans to grow the company through the Small Business Administration 8(a) certification program and to leverage that position to find additional work for the company on military installations. “There are a number of bases where we have a presence, and we believe that we can leverage this relationship to find more work for the company in the future,” says Smith.
“While the boundaries of the two companies are pretty far apart, philosophically, their durability and sustainability, as well as their ongoing value to shareholders, was the driving force behind these acquisitions,” says Smith.
“We don’t want to acquire companies that are so far out of our knowledge base or comfort zone that we don’t understand how they operate or how we can help them become more efficient,” he adds. “We have a pretty wide bandwidth, but we are sensitive to not get too far afoot of our skills.”
“We don’t typically pursue businesses that are necessarily for sale; we look for acquisition targets that have proven leaders who we’ve met through previous business or personal relationships,” says Koniag’s Unger. “Our advisors help us find good opportunities with long-term track records; if we’re going to make an investment, it really needs to move the needle for us.”
Sealaska also looks for relationship-based acquisitions, which sometimes means waiting a long time to find the right fit.
Afognak Native Corporation
“Then the phone calls and conversations started increasing, and people who hadn’t thought of selling their businesses started seeing us as a different kind of owner—not a private equity firm or family-run company, but as a long-term holder of businesses,” he continues, adding that it took more than eighteen months for the corporation to finalize its first three acquisitions.
Sealaska
“Though we are in constant search-and-evaluation mode for growth through acquisitions, we believe it has to be done carefully and methodically, with careful vetting and due diligence,” says Smith. “No matter what the vehicle is, we’re looking for sustainability of earnings and potential growth opportunities post-acquisition as a core aspect.”
According to Smith, a company’s leadership can be key to finding a successful fit. “What is the age of the current leadership team, and how long have they been on board with the company? Will they commit to being on board after the sale?” he asks. “It’s important to have a good succession plan in place so that someone is prepared to take over when senior people exit.”
He adds that it’s also smart to make sure that the purchasing company is bringing something to the table that will help grow or improve the acquisition. “If they’re already at peak condition, the only direction you can go is down,” he says. “You have to be careful about why you’re purchasing a business—you can get enamored that it is operating at a high level, but as a buyer, you need a game plan to help them grow.” 