In the eyes of investment bankers who deal with the largest capital markets, much of the Midwest is nothing more than flyover territory. But from the perspective of a Des Moines-based investment banking firm, the Midwestern states are fertile ground for the type of private placement offerings they structure.

Over the past 20 years, Cybus Capital Markets LLC has gained a reputation throughout North America for connecting agribusiness companies that are seeking to increase their value through a merger, acquisition or divestiture, or by obtaining additional capital. Now, Cybus seeks to broaden its client base to provide similar services to manufacturing, distribution and service companies in Iowa and the Midwest.

“People either know a lot about us or they don’t know anything about us,” said James Eiler, former senior vice president of agricultural financial services for John Deere Credit, who joined Cybus as its managing partner last year. Seven of the firm’s 10 members operate from Des Moines; it also has offices in Sacramento, Denver and Portland, Ore. “We’re trying to increase the percentages of those who have some awareness of us.”

Though cities such as Chicago, Denver and Los Angeles serve as investment banking centers, the clientele of firms in those cities are typically publicly traded companies with annual revenues above $100 million. You might say that Cybus clients are much the opposite.

“In terms of companies that really serve private equity companies with sales of less than $100 million, there’s not a lot of coverage of those companies, particularly in Iowa and the surrounding states,” said Paul McGarvey, a Cybus principal. “That’s one of the big growth platforms that we see we can bring to the Iowa marketplace, as well as Omaha, Kansas City, Lincoln and down into St. Louis.”

Originally established in 1918 as Bell Investments, an agricultural investment firm based in Burlington, the company was purchased by Mutual of New York in 1984. MONY created MONY Capital Markets in 1988 as its investment banking subsidiary and moved the operation to Des Moines. In 1995, MONY Capital Markets completed a buyout and incorporated as Cybus Capital Markets.

“Since 1988, when we really broadened out of agriculture into agribusiness, we’ve done about $2.5 billion in capital for over 200 clients during that timeframe,” McGarvey said.

The food industry has provided significant opportunities — and success — for Cybus. According to McGarvey, 2004 was the firm’s best-ever in terms of its financial performance.

“We estimate there are about 35,000 companies in the food industry that have sales over $10 million, but less than 10 percent of them are publicly traded,” he said. “That’s one of the reasons we have been successful in the food industry. There are opportunities in both mergers and acquisitions and strategic partnerships as well as divestitures.”

Though many who know the firm might firmly pigeonhole Cybus as “the food guys,” the firm has the expertise and contacts to easily transition into working with non-food companies, McGarvey said.

“We’ve worked with companies as large as $1 billion, and we’ve also worked with companies in the public domain; we’ve taken them private through some form of management buyout,” he said. Generally, Cybus works with established companies with revenues of $10 million or more, carefully choosing clients it believes will be good candidates for successfully attracting capital or a partner. More than 80 percent of the firm’s deals over the years have closed successfully, McGarvey said.

“We’ve got the ability to move up and down the size scale and have demonstrated in the past we have the requisite skill sets to take on fairly complex situations,” he said.

In Iowa, Cybus has partnered with lenders that include Wells Fargo & Co., Principal Financial Group Inc., U.S. Bank and West Bank, as well as a number of asset-based lenders across the country. It also accesses capital for its clients through the unregulated “junior capital” markets, using instruments such as subordinated debt, mezzanine financing and common stock issues.

Clients typically put the firm on a monthly retainer while it searches for appropriate opportunities.

“Once they decide to execute a specific strategy, then we’ll assist with whatever that strategy is: buying a company, selling a company, sourcing equity capital to come into the transaction,” he said. In addition to retainer fees for advisory services, Cybus also makes its money on fee-specific activities such as company valuations. The majority of its income, however, comes from success fees.

“For example, if we can source some long-term bank debt greater than 10 years, we’re going to charge a higher commission on that than if we simply assist you in increasing your annual working capital line,” McGarvey said.

The firm’s proprietary database, which it searches to identify potential matches for its clients, contains more than 10,000 companies and capital sources that we use. This year, Cybus plans to make more than 2,500 marketing calls to establish additional contacts.

As for the client companies it takes on, “we focus very much on those entities that can demonstrate growth, a successful business model, a complete management team and have demonstrated success in the past,” Eiler said. “With that mix, you’re able to approach capital sources with a high level of confidence and create as much interest as possible in the opportunity so you’re afforded the best pricing in the marketplace.”

One recent deal closed by Cybus was an investment by Minneapolis-based Norwest Equity Partners in the Des Moines-based Jacobson Cos., a third-party supply chain management company.

“We worked with Jacobson and basically sought out Norwest Equity Partners as part of the solution for Jacobson’s capital transaction,” Eiler said.

Expanding to work with general industrial companies will be an easy transition, given Cybus’ expertise and contacts, he said.

“In Iowa this year, we’d like to extract three to five non-food-related transactions. We’re also scaling up operations in Des Moines, adding another person by mid-year.”