SENA15: Industry-financing breakdown delves into aquaculture, cash flow, investing

The most important thing for a family-owned seafood business looking to sell is to decide what you want to do, what you want to sell, and how you’re going to do it, concluded three expert panelists at a session titled “On the Money: Trends and Opportunities for Investing in Seafood.” The panel took place on day two of Seafood Expo North America in Boston.

Moderated by SeafoodSource Senior Editor James Wright, the panel included Jeff Davis, senior managing partner at International Seafood Partners; Ignacio Kleiman, managing partner at Antarctica Advisors and Tim Antilla; senior VP-seafood and maritime industries at Wells Fargo.

The discussion began with a breakdown of the essentials a company needs to consider when looking to sell or take on a financial partner. “Know what you want to sell. Prepare for that. Are you going to sell the whole business? Are you staying on or selling out? If [you don’t know these things], it slows down the process,” said Davis.

Davis added that family-owned companies tend to be known for bad financials. “The buyer doesn’t care how pretty your business is,” he said. “We’re buying a cash-generating machine. When you buy a business, the business needs to payback investment, which comes from cash generation.”

Cash-flow generation capability is key when selling a business, the other panelists echoed. As a company owner, there’s also a lot of work that should be done prior to selling a company.

“Start early in the game,” said Davis. “Do it a few years before you decide to [sell]. Start preparing: Clean up your act, and get a reality check of what your company is worth. There are hard realities that we, as advisors and investors, encounter every day. You need to stay realistic.”

Companies also need to ensure they provide value to the buyer. “It’s not what you say but what you can prove in the end,” said Antilla. “Many deals fall apart at the end,” due to a lack of due diligence, he added. “If you have problems in the business – legal issues, employee issues – clean them up or make sure they’re taken care of.”

The discussion shifted to debt, which Antilla said can be a great thing to help a company grow, but it needs to be managed carefully in order to not become over-leveraged. If a company is looking for a financial partner, Kleiman said it’s key to have a good growth. “You need to prove how you’re going to get there,” he said. “[Finding a partner] is a good way to grow smaller businesses without giving up ownership.”

Toward the end of the discussion, the panelists touched on the subject of investing in aquaculture versus wild-capture fisheries. “You have to understand it to get into that,” said Davis. “We like well-managed fisheries – I won’t invest in a fishery that has a management problem. I’m going to invest in fisheries that are certified…and are ones that we can count on.”

The fishery has to have long-term value, Davis added. From a business perspective, aquaculture can be more challenging, so a fishery needs to be strong, able to grow, and eventually become public. “It should follow a poultry model,” Davis said.

Kleiman added it could be difficult to get initial financing. “But when you start the business, you need to decide if you’re building to sell or building to become a large player,” he said. “It needs to be financed somehow. There’s a big drive for aquaculture…but if you want to be a player, you need to be a big guy.”

“What happens in aquaculture can impact other businesses as well,” said Antilla. Farmed salmon set the stage for wild salmon, for example. “It made acceptance for that product. Now, an Alaskan guy can come along and say it’s ‘wild, it’s unique,’ when before, it was a commodity. This can happen with other species as well. You may have a competitive issue because of what someone is doing on the aquaculture side. It can shift markets and shift rapidly.”