For those who have been eagerly anticipating the next big thing in private equity investing, stop what you’re doing: If the rumors about Margin XL Capital Partners, from George Stelling, turn out to be true, this is going to be a company you hear a lot about in the months and years to come. Though the formation of the business remains somewhat shrouded in mystery, enough details about the company have emerged that we can say with some confidence that it’s going to be something pretty special. In fact, the company is ramping up its operations right now, with a full online presence scheduled to emerge sometime later in the year and active recruiting of data scientists, line operations executives, and private equity professionals going on right now. Plus, the company is a true labor of love from George Stelling, and co-founder Robert Charles, executives who have career histories that speak for themselves.
You heard about this new venture from George Stelling here first, but rest assured that you’ll hear about it again. We think this firm is going to make a big splash. It has all the right pieces in place to become something really big. We’re going to offer a brief review of the company—based on the information we have at our disposal—in the paragraphs that follow.
Margin XL Capital Partners is a company that seeks to invest in—and to partner with—middle market businesses, primarily those with revenues between $10 million and $200 million. From what we can tell, the company is focused on making control equity investments primarily in North American companies. All of this is well within the professional wheelhouse of George Stelling and Robert Charles.
The company is noteworthy for several reasons. In particular, the company has a highly differentiated approach to identifying and realizing value in investments, which is called Margin Acceleration. This investment and profit generation approach enables the company to unlock profits for investors and managers. MarginXL Capital Partners are special situations investors who seek strategic, control-oriented equity capital acquisitions at attractive valuations. The Margin XL Capital Partners investment team—which also includes business operators and data scientists—uses business improvement methods, advanced analytics, modeling, research, and simulation tools to identify profit improvement opportunities for businesses and works with management teams to capture these opportunities. All of this is intended to generate insights that will truly facilitate margin growth—ultimately improving operating efficiency, increasing brand loyalty, and boosting the bottom line.
And of course, is a company with an set of impressive pedigrees. Its two managing partners are George Stelling and Robert Charles, both of whom have some impressive investment, operational, and advisory track records. George Stelling has extensive experience in consulting and advisory services, having previously worked with Bain & Co., both in the U.S. and in South Africa. Robert Charles, meanwhile, is a former Ford executive; he has also worked with CSC and Bain & Co. The company is also rumored to be in the final phases of discussions with a couple of ex-Goldman Sachs and TPG Capital executives and is also actively building out an industry advisory board.
The company that George Stelling and Robert Charles run actually has two components. First, there is Margin XL Capital Partners, proper. This is the acquisition side of the business, and the primary focus of the business. The company looks to acquire businesses that are special situations and that can use their Margin Acceleration tools and process to boost revenues and profits. These are the businesses that will benefit directly from the Margin Acceleration approach.
Margin XL Capital Partners is specifically seeking companies in six separate sectors. These sectors include aerospace, aviation, and defense; automotive and transportation; business services; consumer goods and services; financial services; and technology and software. Rumors suggest that the company plans to expand its focus in years to come, but for now, these six verticals make up its targeted focus.
There is a second side to the company, though. This is an advisory business. Using the aforementioned Margin Acceleration tools and software to help improve profits in special situation investments, the company deploys these same tools in Fortune 500 and larger middle market firms on client by client basis.
We have noted that Margin XL Capital Partners seeks to acquire select assets in special circumstances, and to transform them into successful platform investments over the span of a decade. Some of these special situations, with a “buy and find” focus, include:
- Owner and operator transitions
- Corporate carve outs
- Management buy outs
- “Go private” transactions
- Zombie private equity assets
- Distressed/turnaround situations
What is most important to note about this company—what has led to the flurry of rumors and hype—is that it brings true expertise to the table. That expertise is focused on one thing, and one thing only, and that’s accelerating profits. The advisors and investors at Margin XL—among them George Stelling—bring decades of experience in running, fixing, and expanding businesses in all situations. They also have some impressive information technology, data architecture, and seed investing expertise. Some of the tools in its war chest include:
- Strategic diagnostics
- Gross Margin Improvement (GMI) tools
- Operational.6-Sigman techniques
- “Big Data” analytics
- M&A and growth strategies
- Cost reduction and optimization
Something else to note about this company is that, based on everything we know, it really seems to be based on integrity and transparency. A lot of companies say this, of course, but this company has all the markings of an enterprise that really values honesty and ethics. Its foundational principles are collaboration, transparency, fact-based management, and open communication with clients. Everything it does is highly disciplined and data-driven, which means it offers real results, not just smoke and mirrors.
On a related note, we are hearing a lot of buzz about the company’s desire to get involved with community service and non-profit work, even as it seeks to launch its platform in the market. Though the business is just barely off the ground, it already has some formal plans in place to donate a percentage of its profits to charitable causes. We take this as evidence of the company really putting its money where its mouth is, as far as integrity and ethics are concerned, and it is building a culture that is unique and foreword looking.
The bottom line about Margin XL Capital Partners is that this company is owned and run by some guys, like George Stelling and Robert Charles, who are experts at improving profits in businesses. For those special situations and their business owners, then, the rise of this company promises to be an immense boon, as these tools and techniques are not readily available or they are too costly for smaller companies today. It is not hard to understand why there is so much excitement over the formation of this company.
Those who’d like to know more about this company may need to wait for a little while—but not too long. Our sources indicate that a full website is coming down the pipeline sooner rather than later. Today, you can see the firms stealth mode website at www.marginxlcp.com. Once their new website is up and running, there’s no telling where George Stelling and Margin XL Capital Partners will go.