Brad Jacobs has created five companies, not including the two XPO spin-offs. (XPO)
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Brad Jacobsexecutive president of the less-than-truckload carrier XPO Inc.announced Dec. 11 that it plans to target the building products industry in its latest business venture.
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Jacobs told the Economic Club of New York that he plans to create QXO, a technology-focused public company that would acquire and grow companies distributing products ranging from lumber to windows and doors to supplies landscaping. The new company will be marketed to businesses and individuals in residential, commercial, industrial and infrastructure construction.
“I’m trying to make money for shareholders; that’s what I’ve always tried to do, and so far we’ve done it,” Jacobs told the audience during a question-and-answer session.
“I try to follow the same playbook that I’ve followed over and over again and not deviate too much from it, which is to find a great industry that grows organically on its own, without me playing the catalytic role,” he said. . “And construction product distribution is quite large, $800 billion, and construction product distribution has grown about 7% per year over the last five years. You can do a lot with 7% organic growth.
Jacobs said he expects to reach $1 billion in revenue by the end of QXO’s first year and $5 billion by year three.
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Earlier this month, Jacobs announced that it had entered into a billion-dollar investment deal with technology and consulting firm SilverSun Technologies, and that it was considering spinning off its core businesses and use the standalone platform to acquire other companies.
During his business career, Jacobs has started five companies, not including two transportation industry spin-offs, and he has said that at least $900 million of the initial money to start QXO would come from his bank account, with an additional $100 million coming from investors. The new company will be listed on the stock exchange.
Jacobs told the audience that now is a great time to get into the building materials industry because he believes it lags behind other industries in terms of technology adoption. This includes online ordering of supplies and equipment, as well as the emerging use of factory robotics for building prefabricated and prefabricated structures, such as trusses and wall panels.
Jacobs also said the building materials industry is highly fragmented, with about 7,000 companies in North America and 13,000 in Europe. He also noted that he had studied more than 500 companies as potential buyers.
“There are a lot of things to buy here,” he said. “There are 20,000 potential targets, and that will keep us busy for the next 10 years.”
Jacobs also believes the timing is good because government, the building industry and real estate groups believe there is a nationwide housing shortage that is not getting better.
There are 20,000 potential targets, and that will keep us busy for the next 10 years.
Brad Jacobs, executive chairman of XPO Inc.
A Realtor.com analysis from March showed that the gap between single-family home construction and new household formation widened to 6.5 million homes between 2012 and 2022. However, when including the multifamily construction, which includes rental housing and condominiums, the gap is reduced to 2.3 million units.
The country’s housing stock is also aging and falling into disrepair. A Harvard University report says the average age of an American home has reached 43 years in 2021, up from 27 years in 1991. A Census Bureau report says 35% of the nation’s housing stock is at least 60 years old. years.
A study by the Federal Reserve Bank of Philadelphia found that it would cost nearly $130 billion to repair the nation’s inadequate housing.
XPO Headquarters in Ann Arbor, Michigan (XPO Inc.)
“You have very old residential construction, about 40 years old,” Jacobs said. “When I was a child, an old house was 10 years old. You’re going to have a lot of repairs and renovations. There’s also a big end user for construction product distribution, and if you look at non-residential construction, it’s even older.
“The average structure in the country is more than 50 years old. I want to play residential. I want to play in the non-residential sector and the third part is infrastructure. I really like the infrastructure. When I talk about infrastructure, I’m talking about building all the roads, bridges and tunnels, and most people think that’s going to cost $2 trillion. The long-term trends therefore seem very favorable to me.
Over the past three years, construction spending in the United States has increased. But residential construction is slowing, in part because rising interest rates are pushing potential new buyers out of the market and encouraging older homeowners to hold on to their homes, even if they prefer to downsize.
Twelve years ago, with $150 million of his own money, Jacobs built less-than-truckload carrier XPO into a supply chain giant through a series of mergers and acquisitions and by splitting up two companies.
GXO Logistics manages outsourced supply chains and warehousing, as well as reverse logistics, for blue-chip clients in more than 30 countries. The spin-off was announced in December 2020 and completed in August 2021.
RXO, a freight brokerage technology platform, was split in July 2022. The following month, Jacobs announced his intention to step down as CEO of XPO but remain executive chairman.
Jacobs will serve as both chairman and CEO of QXO while remaining chairman of XPO and its spin-offs. RXO inc. And GXO Logistics. XPO Rankings #5 on the Top 100 largest for-hire carriers in North America and rank GXO and RXO No. 6 And 18 respectively on the TT List of the 100 Largest Logistics Companies in North America.
