Jacobs Names New Company QXO, Dealing in Building Materials
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Brad Jacobs, the executive chairman of less-than-truckload carrier XPO Inc., announced on Dec. 11 he plans to target the building products industry in his latest business venture.
YELLOW AUCTION: XPO acquires 28 properties for $870 million
Jacobs told the Economic Club of New York he plans to start QXO, a publicly funded, tech-focused company that will acquire and develop businesses that distribute products from lumber, doors and windows to landscaping supplies. The new company will be marketed to businesses and individuals in residential, commercial, industrial and infrastructure construction.
“I’m trying to make money for the 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’m trying to follow the same playbook that I have followed over and over again and not deviate from that very much, and that is to find a big industry that grows organically by itself, without me acting as a catalyst,” he said. “And building products distribution is pretty big, $800 billion, and building products distribution has been growing by about 7% per year over the last five years. You can do a lot with 7% organic growth.”
Jacobs said he expects to achieve a revenue run-rate of $1 billion by the end of QXO’s first year and $5 billion by its third year.
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Earlier this month, Jacobs announced he had reached a $1 billion investment deal with technology and consulting company SilverSun Technologies, and he plans to spin off its main businesses and use the stand-alone platform to acquire other companies.
During his business career, Jacobs has created five companies, not including two transportation industry spin-offs, and he said that at least $900 million of the initial money to start QXO will come from his bank account, with another $100 million from investors. The new company will be publicly traded.
Jacobs told the audience that this is a great time to enter the building supply products industry because he believes it is behind other industries in terms of the adoption of technology. That includes online ordering of supplies and equipment, and the emerging use of factory robotics for constructing manufactured and prebuilt structures, such as trusses and wall panels.
Jacobs also said the building supply industry is highly fragmented with an estimated 7,000 companies in North America and 13,000 in Europe. He also noted that he has researched more than 500 companies as potential purchases.
“There are plenty of things to buy here,” he said. “There are 20,000 potential targets out there, and that will keep us busy for the next 10 years.”
Jacobs also believes that the timing is right because government, the building industry and realty groups believe there is a nationwide housing shortage that is not improving.
There are 20,000 potential targets out there, and that will keep us busy for the next 10 years.
Brad Jacobs, executive chairman of XPO Inc.
A March analysis from Realtor.com showed the gap between single-family home constructions and new household formations expanded to 6.5 million homes between 2012 and 2022. However, if multifamily construction is included, which includes rental units and condominiums, the gap is cut to 2.3 million units.
The nation’s housing stock also is aging and falling into disrepair. A report from Harvard University said the average age of an American home reached 43 in 2021, up from 27 years in 1991. A Census Bureau report said 35% of the nation’s housing stock is at least 60 years old.
A Federal Reserve Bank of Philadelphia study found it would cost nearly $130 billion to repair the nation’s inadequate housing.
XPO headquarters in Ann Arbor, Mich. (XPO Inc.)
“You’ve got really old residential construction, like 40 years old,” Jacobs said. “When I was a kid, an old house was 10 years old. You’re going to have a lot of repairing and remodeling. There is also a big end user for building products distribution, and if you look at the non-residential construction, it’s even older.
“The average structure in the country is more than 50 years old. I want to play in residential. I want to play in nonresidential and the third component is infrastructure. I like infrastructure a lot. When I say infrastructure, I am talking about building all the roads, bridges and tunnels, and most people think that is going to cost $2 trillion. So, the long-term trends look very favorable to me.”
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In the past three years, U.S. construction spending has grown. But residential building is slowing, in part because of higher interest rates pushing potential new buyers out of the market and encouraging older homeowners to hang on to their homes, even when they would rather downsize.
Beginning 12 years ago with $150 million of his money, Jacobs has grown less-than-truckload carrier XPO into a supply chain giant through a series of mergers and acquisitions and by spinning off two businesses.
GXO Logistics manages outsourced supply chains and warehousing, and reverse logistics for blue-chip customers in more than 30 countries. The spin off was announced in December 2020 and completed in August 2021.
RXO, a tech-enabled freight brokerage platform, was spun off in July 2022. The following month, Jacobs announced plans to step aside as CEO of XPO but remain executive chairman.
Jacobs will be both chairman and chief executive officer of QXO while remaining chairman of XPO and spinoffs RXO Inc. and GXO Logistics. XPO ranks No. 5 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and GXO and RXO rank Nos. 6 and 18 respectively on the TT list of the top 100 logistics companies in North America.
