Private Equity 3.0

Private Equity 3.0

GenNx360 Capital Partners describes itself as the new generation of private-equity firms, focused on bettering business operations rather than just doing a deal. Three former GE executives are helping to make it happen.

Where do long-time former General Electric executives go when they leave that industrial behemoth? Three of them, whose combined experience with GE approaches 90 years, are among the founders of GenNx360 Capital Partners, a New York-based private-equity firm that clearly has not given up on U.S. manufacturing as a valuable investment. Indeed, the company in July closed on its latest acquisition, Maine Machine Products Co. The South Paris, Maine-based company specializes in manufacturing precision components for the defense, oil and gas, and semiconductor industries.

Lloyd Trotter: "If you can get the productivity right, the quality right, you can do that manufacturing very effectively in the U.S."
"I've never held onto the belief that manufacturing was totally going to be abandoned in the U.S. That's not what's really happening," says Lloyd Trotter, a founder and managing partner of GenNx360. "Very clearly there's a subset of sophisticated parts that require complicated machinery that's not easily translatable -- and even size factors into it -- into a low-cost region. If you can get the productivity right, the quality right, you can do that manufacturing very effectively in the U.S."

Trotter is among the former GE executives leading GenNx360 after a nearly 40-year career at General Electric in a variety of roles, including president and CEO of GE Industrial and capped with being named a vice chairman in August 2006. The others include GenNx360 founders James Shepard, whose 27-year career with GE most recently included president and CEO of GE Infrastructure Sensing, and Arthur Harper, whose 21-year GE career included the position of president and CEO of GE Equipment Services. (A fourth founding member, Ronald Blaylock, previously founded investment firm Blaylock & Co.)

The latest acquisition by GenNx360 Capital Partners is Maine Machine Products Co. Its products, custom precision components and assemblies, appeal to the private equity firm's aim to be involved in sophisticated parts making.
GenNx360, founded in 2006, focuses on industrial business-to-business companies with $75 million to $500 million in revenues. Its portfolio currently numbers six, and includes manufacturing, business process outsourcing and global logistics firms. On the manufacturing side, Trotter says the company looks for businesses that produce sophisticated parts with very high quality and in some cases very short turnaround times. Additionally, GenNx360 seeks businesses serving growth areas. "If I look at the portfolio of companies that we've bought, they're serving what I call infrastructure companies that are capitalizing on the need for clean fuel and so on," Trotter notes.

GenNx360 describes itself as a private equity 3.0 firm. It is a model Trotter says is several generations removed from private equity 1.0, which he describes as simply about doing deals and coming out with better deals. Private equity 3.0, on the other hand, is about operating companies better. And while other private equity firms may talk the talk about how they can operate companies better, Trotter suggests that GenNx360 is able to walk the walk.

"Three of the founding members of GenNx360 are out of operating backgrounds. Generally you'll see the founding members of other private equity firms are more financial oriented," he says. "In my experience, being able to stand toe-to-toe with our CEOs in a portfolio company and debate the merits of the methodologies they're using forces them to think outside of the box, and I believe it helps them improve at a much faster rate."

Among the tools GenNx360 brings to the companies it acquires is the Trotter Matrix, a method Trotter developed at GE while he served as vice president of manufacturing for the industrial businesses. Its purpose then was to share best practices among GE manufacturing plants; its purpose today is to share best practices among the firm's portfolio companies. "You can benchmark expenses, you can benchmark sales, you can benchmark almost anything," Trotter says.

That's not the only GE influence, however. It's there in the types of firms in which GenNx360 invests. Trotter says he or his partners have managed companies in those realms sometime during their GE careers. "It's not something new to us; it's something we've seen before."

Even more, "You can't help but bring GE philosophy in that I spent 38 years in General Electric," Trotter says. "Whether it's the Trotter Matrix or how we develop people or how I manage on a day-to-day basis in looking at the metrics for a manufacturing plant or business, all of that is learning I got over my 38-year career at GE."

GenNx360 Capital Partners steers away from deals in which it does not have a controlling interest or an operating role. The private equity firm describes its operational expertise as its differentiating factor. That doesn't mean GenNx360 subscribes to wholesale dismissals of the leadership in companies it purchases. Indeed, Trotter says the companies generally have a "pretty good track record of growth." Trotter uses words like "collaborative" or "mentoring" to describe several of the relationships, acknowledging that the level of involvement varies by company.

"The reality is that no matter how much you invest, a successful manufacturing operation is all about the people. You've got to figure out how to connect mentally as well as engage everybody to be on the same team. We have a single purpose and that is: How do we make this business better? That's no different in a large corporation or a small corporation," Trotter says. The managing partner says an organization may try any number of different strategies to improve a manufacturing firm, "but if you can't get there on the people side, even if you improve the operation, you probably fell short of what you could do."

See Also:

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.