More acquisitions: fewer mergers in Alaska.

• Author: Stomierowski, Peg
• Position: FINANCIAL SERVICES

Alaska companies, strategizing to survive and ride the waves of historic recession, are continuing to quietly troll for smart acquisitions and business combinations.

"I think we've only seen the tip of the iceberg, Walter Featherly, a managing partner of Patton Boggs in Anchorage, whose clients include many Alaska Native corporations (ANCs), said of their involvement in the Alaska business marketplace. When asked about merger and acquisition (MA) trends, Featherly said while he'd noted an increase over the last couple of years, he'd observed more acquisitions than mergers on the ANC front.

One example he cited was Koniag Development Corp.'s 2009 acquisition of Dowland-Bach Corp., a specialty manufacturing and alloy distribution company servicing the North Slope oil industry. KDC is the wholly owned subsidiary of Koniag Inc., the Alaska Native regional corporation for the Kodiak area. With its acquisition of Dowland-Bach, Featherly reflected, Koniag was able to bring more capital and other resources to what already was a successful, but relatively small, business operation.

One reason for the perceived quickening, Featherly noted, is that many of the ANCs, as they have grown and matured, have the capital and infrastructure to diversify and expand into Alaska-based or other markets.

[ILLUSTRATION OMITTED]

8(a) CHANGES

Another factor in the increase has been changes in the government-contracting regulatory environment, particularly regulatory activities pertaining to the Small Business Administration (SBA) 8(a) business-development program.

Stricter interpretation and enforcement of SBA 8(a) rules, and greater scrutiny of the process, have made it harder for ANCs to expand their federal-contracting business operations by forming new 8(a) businesses from the ground up, Featherly said. For example, in recent years, he said, the SBA has granted many fewer waivers of the rule requiring concerns applying for 8(a) certification to have two years of successful business operations. In such a climate, picking up other small businesses, especially those with a proven history of successful operations, can represent an attractive alternative to starting a business from scratch.

Even where a suitable target company exists, an ANC may choose to acquire only 51 percent of the equity because that's all that's required for stock or ownership interest in order to achieve 8(a) eligibility, he said. Only rarely, he added, would it make sense for an ANC-owned...