"Management is doing things right; leadership is doing the right things."
Famed business magnate Peter Drucker certainly struck a chord with this idea, which refers to the operational aspect of running an organization efficiently and effectively.
Essentially, while management is concerned with the execution and operational aspects of running a business, leadership is about setting the direction and inspiring others to achieve a shared vision. Effective organizations require both strong management and leadership to thrive in today's dynamic and competitive business environment.
The philosophy is at work at Washington, DC-based Xalles Holdings (OTC:XALL). As a holding company, Xalles does not operate businesses directly but rather owns equity interests in other companies. As part of that strategy, the company provides management and advisory services to its portfolio companies to support their growth and development.
Currently, its portfolio consists of technology-based companies operating in sectors such as financial services (fintech), healthcare, artificial intelligence, commerce, and security/defense.
Xalles strategically pursues an acquisition strategy focused on technology companies boasting strong assets and growth potential, with the aim of securing lucrative exits.
Building a portfolio with purpose
The company's origin lies in systems implementation and development, but it underwent a significant transformation in 2015 through a reverse merger, becoming a publicly traded entity on the OTC Markets. Around the same time, the company shifted its business model to focus on acquiring technology firms with promising assets and growth potential.
“Our goal is to bring early-stage companies through the business lifecycle from incubation to acceleration, growth, and, ultimately, a lucrative exit,” chairman Thomas Nash told Proactive.
Nash is well known in the financial supply chain and payment services industry, with a track record of providing strategic guidance to over 200 companies worldwide, ranging from small businesses to major corporations such as US Bank, MasterCard, and Citibank. He has implemented financial systems for US Government agencies, including the Department of Defense and the Department of Homeland Security.
Nash's consultancy services have also been sought by various governments globally, including Brazil, China, Hungary, and Romania. Alongside his previous consultancy work, Nash has demonstrated his entrepreneurial acumen by successfully launching startups in the payment, eCommerce, and IT sectors.
Now, Nash is using his experience to build out Xalles’ portfolio. Recent acquisitions by Xalles have spanned diverse sectors within the technology industry, encompassing artificial intelligence solutions, financial services for the underbanked population, and defense technology firms.
Xalles as a strategic partner
A recent example is CashX, a fintech firm focused on providing financial services solutions, particularly catering to unbanked and underbanked communities. CashX offers a network of self-service kiosks that enable users to convert cash into digital currency easily, as well as a mobile app that provides real-time financial management tools with minimal fees.
The integration of CashX with Xalles’ existing applications complements its consumer financial services, according to Nash.
Explaining the strategic rationale to Proactive, Nash said Xalles “already had a portfolio of a couple of interesting financial services companies, so (CashX) is very much a nice fit.”
Rather than imposing strict policies, Xalles acts as a guiding partner, providing resources and assistance while allowing day-to-day management to make operational decisions. Xalles offers financial support, marketing assistance, and access to its business network to help portfolio companies achieve their goals. The focus is on creating a comprehensive business plan aligned with key financial milestones, ensuring clarity and direction for the company's growth.
It can be a fine line to walk as a holding company, knowing when to get involved and when to leave day-to-day management to the team.
Nash has a roadmap for navigating that line. “We are more like a big brother to provide a helping hand as opposed to dictating specific policies,” he said. “Our acquisition agreements lay out a framework, but within that, the day-to-day decisions on things like personnel decisions or their pipeline still reside with (the portfolio company’s) management.”
A roadmap to success
As a public company, Xalles and its team are responsible for building early-stage businesses while creating value for its shareholders at the same time. When it comes to its exit strategy, Xalles remains adaptable. Instead of a rigid timetable for exits, the firm prefers assessing market conditions to determine the optimal timing as part of its flexible incubation-to-exit model.
“At the end of the day, what will be the proof in the pudding is how successful some of these exits are over the next few years,” Nash acknowledged. “That will really allow people to sit back and judge whether they thought it was a good business model or not.”
What does success look like to Nash?
“We win, whether (the companies) are still part of our corporate family, or they exit,” he said.
As wholly owned subsidiaries, their quarterly financial results are consolidated into the holding company's public information, helping the income statement. Upon exit, whether through sale or IPO, Xalles benefits financially, either through cash proceeds or stock valuation, thus positively impacting its balance sheet.
"When they exit, they're likely to do so through a cash sale. In such cases, we share a predetermined percentage based on our acquisition agreement, resulting in a significant portion of the proceeds benefiting our balance sheet,” Nash explained. “Alternatively, if it's an IPO, we receive fairly liquid stock, ideally at a favorable valuation.
“We’re not trying to keep them forever. It’s like sending a child off to university – at some point they are ready to leave the nest.”
