10 Minute Text

“It’s not about building empires” A shipping tycoon on his next act — and why it’s not in China

Mar 7, 2023, 8:13am EST

Brad Jacobs built three big companies through serial deal-making — and un-making. He built XPO Logistics into a shipping giant through more than a dozen acquisitions, then broke it up piecemeal, spinning off three separate companies to investors.

Now he’s back on the hunt, and we caught up about why he’s hunting in SPAC-land, how the pandemic is rewiring global supply chains, and what most executives get wrong about M&A.

Liz Hoffman said:

Hi Brad, thanks for doing this. First, can you send a selfie and tell me where you are?

Brad Jacobs said:

I’m at my desk researching industries for my next big thing. I’m looking for another “32-bagger” like XPO!

Liz Hoffman said:

You’ve been on the hunt for a few months now. What’s on the short list?

Brad Jacobs said:

Only about half a dozen industries are still in play. I’ve studied about 300 different companies so far across a couple dozen industries. Most of them don’t have the opportunity to create the massive shareholder returns I’m looking for. The good news is I’m only looking for one. People shoot me new ideas almost daily. Please ask your readers to reach out to me on LinkedIn! 🙂

Liz Hoffman said:

Careful, they might want a fee… what industries are interesting and what wouldn’t you touch?

Brad Jacobs said:

I’ve paid a lot of fees over the years, Liz. 😊

Brad Jacobs said:

I’m not going to talk about specific industries yet, but I can tell you that the primary thing I look for is scalability. The main way I know how to create massive shareholder value is to massively grow a company. That means after ten years the company has to be in a whole new league. I’m naturally gravitating to industries that are at least tens or hundreds of billions of dollars in size. At the same time, I’m looking for the quicksand, like could AI or geopolitics disrupt the business model.

Liz Hoffman said:

Lots of wreckage to sort through in SPACs -- anything interesting to you there?Or is that business model tainted now?

Brad Jacobs said:

I’m open-minded about SPACs. Most of them shouldn’t have gone public in the first place, but I wouldn’t rule out a reasonably valued SPAC that’s actually a good company. Again, I’m only looking for one needle in a haystack.

Liz Hoffman said:

Where’s the money coming from?

Brad Jacobs said:

Raising money is the least of my concerns. I have my own money, and I’ve raised $25 billion over my career. Capital markets are always looking for value-creating opportunities.

Liz Hoffman said:

Putting your XPO hat (back?) on: The pandemic showed us how fragile supply chains are, the hidden costs of just-in-time delivery, tradeoff between resilience and efficiency, etc. What changes from here out?

Brad Jacobs said:

Near-shoring and friend-shoring are certainly on the rise. Everyone is de-risking their supply chains. We invested billions of dollars into tech innovation at XPO (and what’s now GXO and RXO) to gain the efficiency that shippers are zeroing in on now. Technology mitigates the tradeoff between resiliency and efficiency and that’s only going to gain momentum going forward.

Liz Hoffman said:

But reshoring takes time. Big companies (I’m thinking Apple etc) are going to be incredibly reliant on China for the foreseeable future, right?

Brad Jacobs said:

“Foreseeable” is in the eye of the beholder.

Liz Hoffman said:

Speaking of which, would you do something that required going all-in on China?

Brad Jacobs said:

Probably not. Too much risk.

Liz Hoffman said:

Not too big a domestic market to ignore? I think GM sells more cars in China than in the US (will check that fact).

Brad Jacobs said:

There’s plenty of opportunity to create massive shareholder value elsewhere. XPO had very little exposure to China and it was a 32-bagger.

Liz Hoffman said:

Ok last one: You’ve built (and dismantled) a couple empires now. Executives usually do the first one badly and the second one not at all. What do people get wrong about M&A-as-business-plan?

Brad Jacobs said:

A lot of people do M&A just to grow, but in reality there are a lot of essential ingredients and you need to get them all right — a rock-solid strategic plan, an accretive price, significant synergies and cost savings, near-flawless integration (especially for all the tech systems), successful blending of cultures, among many other things. That’s why only a minority of M&A deals ultimately create significant value. I’m actually writing a book about this.

Liz Hoffman said:

Alright that’ll do it. Thanks for the time - ran slightly over but we’ll chalk it up to some lingering supply chain backlogs

Brad Jacobs said:

Thank YOU, Liz. Send me a signed copy of your Crash Landing book.

Liz Hoffman said:

Not too late to preorder :) Just-in-time delivery on Tuesday…