Cody Ag Buys Sierra Dairy Laboratory, a Food Safety Lab in California Dairy Country

The Setup Cody Ag spent five years at JPMorgan, covering public REITs in New York and rotating to San Francisco to cover semiconductors and software. He sat next to Anthony Runko, who left in 2018 to do a traditional search with Eric Leach. That coffee planted the seed. Ag applied to Harvard Business School and Stanford GSB. He got waitlisted at Harvard, then dinged the next year from both. He decided an MBA was not required for a self-funded search and moved on. Ag and his wife, a United Nations interpreter, burned the boats in fall 2022. Both quit their New York jobs and moved to California to chase the search full-time. He had grown up on job sites in San Diego where his father built custom homes for clients in La Jolla and Rancho Santa Fe. The lesson he took from watching those clients: working hard is table stakes. Picking the right game matters more. With the Fed hiking rates and recession chatter everywhere, Ag narrowed his thesis. If SBA debt was going to sit on top of the business, cash flows had to survive a downturn. His logic: people always eat, food always needs to be safe, so food testing should be durable. Two weeks after he wrote that thesis down, Sierra Dairy Laboratory hit the market. The Deal Sierra Dairy Laboratory sits in Tulare, which the seller called the Mecca of American dairy. Tulare County has the most cows in the country. The business runs roughly 600,000 tests a year, sampling raw milk at dairy farms, co-ops, and processing plants for bacteria counts and other quality markers. Twenty-five employees. Founder Bill Arman started it in the early 1990s and, at 68, wanted out. Ag's first offer lost to a national lab rollup. That buyer wanted the business but not the building, and planned to relocate all operations an hour north. Key staff pushed back, the deal collapsed, and Ag (on advice from an investor he met on X) submitted an unsolicited higher bid while the original LOI was still theoretically live. The broker called within days. Quality of earnings revealed add-backs that did not hold up. Ag walked Bill through the bank's math: if the number shrinks, the loan shrinks, and the price has to come with it. The final purchase price dropped more than 10% from the original offer. A small seller interest-rate bump helped close the gap. Capital structure: roughly 75% SBA 7(a), remainder a mix of equity and a seller note. Ag drained his 401(k) for the equity check, eating the early-withdrawal penalty. He raised the rest from outside investors, more than half of whom he met on X. Because the deal included two buildings (about 10,000 square feet total) at roughly 35% of the purchase price, the SBA blended the 10-year business amortization with the 25-year real estate amortization into a single 16-year loan. Closed end of October 2023. Operating Moves Ag did not touch the org chart. Natalie runs customer relationships and...