With His Stock Up 330%, a Serial Dealmaker Seeks Biggest Hit Yet

(Bloomberg) -- In a packed Miami Biltmore Hotel conference room, the assembled executives snickered as a little-known speaker by the name of Brad Jacobs laid out a bold plan.

It was February 2012 and Jacobs was telling them how he was going to turn his $175-million-a-year truck brokerage company into a $5 billion-a-year behemoth by 2016. Kevin Sterling, an industry analyst who was in the room that day, remembers hearing the chatter all around him: “This can't be done; who does he think he is?”

Not only did the audience terribly underestimate Jacobs but Jacobs underestimated Jacobs. After a series of rapid-fire acquisitions of trucking outfits, warehouse operators and small truck brokerages, he pushed revenue at the company, called XPO Logistics, to $14.7 billion last year. XPO is now the third-largest publicly traded logistics company in the U.S., trailing only FedEx Corp. and United Parcel Service Inc. The stock is up about 330 percent since Jacobs made that Biltmore speech.

And he isn't finished. Flush with $665 million in newly raised cash, he estimates he's now in position to spend as much as $8 billion in what would be by far his biggest acquisition yet. Large freight-forwarding companies could be on the list, among other targets, he said.

“We're looking at a lot of different things,” Jacobs said.

The 61-year-old Jacobs is one of the nation's most prolific acquirers -- more than 500 deals at last count -- though it hasn't won him the renown of a Warren Buffett. His deals are typically small and he targets unsexy sectors, from garbage collection to tool rental. He looks for industries fragmented with lots of competitors, goes on a buying binge to gain economies of scale, and then sells the assembled company.

“It's so, so satisfying to take something from pure abstraction -- just an idea -- and turn that into something very concrete,” Jacobs said. “It's artistic as much as it is commercial.”

‘Corporate Greed'

Never having worked under a boss, Jacobs mostly taught himself the art of the deal. Along the way, he's made a lot of money for his investors, as well as made a few enemies. The Teamsters Union has labeled XPO the “poster child of corporate greed'' for enriching Jacobs with big stock options while overworking and underpaying drivers. Jacobs defends his company's labor record, saying the Teamsters are just trying to organize the contract drivers, who "overwhelmingly" prefer to stay independent.

Jacobs's appetite for riches started early. At 23, he left Brown University (he also attended Bennington College) after seeing a TV news report about Exxon's record profits in 1979. Oil would be his first fortune, he decided. The Iranian Revolution had just thrown the oil market into a tizzy, which made his service to match buyers and sellers of crude and refined products all that more valuable.

“We just started making a lot of money really quickly,” said Jacobs, who's been known to work six-month stretches without a day off. “I hired a bunch of folks who were young, hardworking and ambitious and honest. I barely slept.”

Bedtime Reading

But the success attracted rivals in the form of Wall Street banks and Japanese companies. He sold the oil-trading business in 1989.

His next move was inspired while reading analysts' reports in bed at his London home one night. The topic: trash removal companies were making millions in free cash flow. 

“How hard could it be to pick up someone's trash, bury it in a hole and then send out an invoice,” Jacobs figured.

The result was United Waste Systems, focusing on rural markets that were being ignored. Jacobs made more than 200 acquisitions of garbage truck operators before his company was bought by USA Waste Services Inc., now known as Waste Management Inc., for $1.9 billion in 1997.

Tool Rental

He then went into the tool rental business, which, like garbage collection, had dozens of small companies competing ferociously. Soon, Jacobs had surpassed Hertz as the largest tool-rental provider. Jacobs eventually sold his stake.

His move into the trucking and logistics business came in 2011 when he paid $150 million for a controlling stake in what is now XPO.

Jacobs is now latching XPO to the fast-growing e-commerce sector without competing head on with behemoths such as FedEx, UPS and Amazon.com Inc. He's plowed into last-mile deliveries of large goods such as furniture and appliances that require assembly in the home.

As Jacobs builds these businesses, XPO is likely to catch the attention of large players including FedEx, UPS and DHL Worldwide Express, and become an acquisition target itself, said Adam Karr, managing director of Orbis Investment Management, the largest shareholder of XPO.

If that happens, Jacobs said he's probably got one or two more new companies in him.

“There will come a point in time in the future I'll get another itch to do another startup,” Jacobs said. “For the time being, I'm all-in at XPO Logistics.”

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, David Papadopoulos at papadopoulos@bloomberg.net, Larry Reibstein, Susan Warren