GenXlbo Holdings LLC dba GenX Capital Group (GXH) is an “Independent Sponsor” buyout firm with M&A and corporate expertise, who is buying, improving, and rolling up established profitable companies with strong cash flow under the $5 million price point, and selling them after 3-5 years at a significant profit. GXH is raising capital for this venture from $5 million up to an aggregate $25 million for the purchase of these companies. Growth capital is not needed in most cases since these companies generate sufficient EBITDA to fund their own growth.
GXH targets mostly B2B companies, and is industry agnostic, but excludes cannabis and hospitality.
The GXH business model is to (1) buy multiple profitable, strong cash-flowing, small companies at approximately 2X EBITDA, (2) increase EBITDA for each company, (3) consolidate them into larger professionally operated companies, and (4) sell them at 10X-12X the improved and combined EBITDA.
GXH profits exponentially on these acquisitions in three ways: (A) cash flow during ownership and (B) equity growth upon sale which is created from (i) EBITDA growth and (ii) arbitrage from the roll-up.
- Cash Flow. GXH earns cash flow from the target companies the entire time of its ownership from day-1 (before improvement) because these are profitable, established companies that are not distressed.
- EBITDA Growth. Since the companies GXH buys are often managed by their founders, and not professional corporate operators, there is usually a tremendous opportunity for performance and EBITDA improvement. GXH can magnify this effect with synergies realized from the rollup phase. When EBITDA is increased the value of the company is increased. For this reason GXH projects an average EBITDA growth of at least 50% between acquisition and exit, to be extremely conservative.
- Arbitrage Effect. This is the greatest contributor to profits by far. GXH’s ability to buy at 2X EBITDA and sell at 10X-12X EBITDA comes down to GXH’s sourcing of small companies, where 2X multiples are the norm. After consolidation and improvement, the companies are sold to the national M&A market where middle market companies are sold at 10X-12X EBITDA as the norm.
GXH was founded by a top law firm private equity M&A attorney whose team includes former investment fund and M&A professionals, global corporate executives, and big 4 accounting/consulting firm consultants. They average nearly 30 years of professional experience each, with expertise in valuation, acquisition strategy, deal structure, merger integration, business process improvement, turnarounds, talent acquisition, and investment strategy.
Proposed investor ROI is structured as:
- Debt. This is a traditional promissory note with monthly principal and interest payments: 4% annual interest; 4 year term; 10 year amortization; balloon at maturity (4 years).
- Profit Participation. This is a contract to earn 50% ROI annualized until exit, to be paid in a lump sum at exit, targeted to be 4 years (200% ROI at the end of 4 years). It is payable contingent on realization of profits at exit.
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