How Brad Jacobs Will Invest $4.5 Billion to Reshape Building Supplies

SPEAKER_1 (0:03)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:20)

Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:25)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Today, we are bringing you a live episode recording that took place at Bloomberg's recent Invest Conference, where we sat down with Brad Jacobs, the billionaire and serial entrepreneur, now chairman and CEO at QXO.

Joe Weisenthal (0:42)

We talked to Brad late last year about his new company, QXO, and the basic plan of buying up companies within the building supply distribution industry.

And since we talked to him, he's raised four and a half billion dollars. And so we wanted to learn a little bit more about how he's actually gonna deploy his money.

Tracy Alloway (1:02)

Four and a half billion dollars is a lot to spend. I think I read somewhere it was the biggest ever capital raising in the building materials industry. So definitely worth talking to him again.

Joe Weisenthal (1:13)

Yep, we still don't know. He hasn't bought any companies yet, but we got a better sense of where he's at and his sort of approach to figuring out how he's gonna deploy his cash.

Tracy Alloway (1:23)

Take a listen.

Joe Weisenthal (1:25)

So as Tracy mentioned before, we are here interviewing Brad Jacobs, chairman and CEO of the newish firm QXO, which is going to make a major splash in the building material space. Brad, thank you so much for joining us.

Bradley S. Jacobs (1:40)

Slight correction. We've already made a splash.

Joe Weisenthal (1:43)

You've already made a splash? I see you've raised a ton of money. Does that count as a splash?

Bradley S. Jacobs (1:48)

So since I... First of all, thank you for inviting me.

But since we did that podcast...

Joe Weisenthal (1:54)

We talked to Brad, I think in December.

Bradley S. Jacobs (1:56)

It seems like a long time ago. We built out the management team. So I have 15 amazing people now, one of whom was the head of M&A at Barclays on Garden Leaf, and all the rest I know really well because they either worked at XPO or GXO.

Joe Weisenthal (2:13)

Some company with XO in it.

Bradley S. Jacobs (2:14)

Yeah, it didn't have X and O in it of the next time we didn't hire them.

And then also we raised money. We raised, we put our billion dollars into the pipe that we did into that public company. And then we raised another three and a half billion dollars from institutional investors, mostly long only funds who know us. And now we're out there, going to the next stage is let's go buy some companies.

Tracy Alloway (2:37)

Wait, so four and a half billion dollars raised must be the biggest single raise in the building industry's history, right? So what's the pitch when you're going out to people and saying, give us your money for this as yet unproven business model? I know you have a number of companies, all three letter acronyms.

But like, why do they want to give you four and a half billion dollars or three and a half?

Bradley S. Jacobs (3:04)

Okay, here's the secret.

I know most of the people who invest in us. It was mostly people who have invested in one of the XOs or done the rentals, you know, the historical investors who did well, and they're betting that we're going to do well again.

Tracy Alloway (3:19)

So when you're talking to investors who already know you, what do they think is the Brad Jacobs playbook for creating companies?

Bradley S. Jacobs (3:26)

Well, as you know, I actually have a book with a playbook in there.

Tracy Alloway (3:29)

Oh, yeah. Brad's book has also a very modest title, which is How to Make a Few Billion Dollars.

Bradley S. Jacobs (3:35)

I think that's a good title, catchy title. It gets people to remember.

So the playbook is pretty straightforward. It's first of all, talent, making sure the people in the company are amazing, are honest or hardworking or collaborative or really special people, that they can get along with each other. And we figure out ways where we can debate issues honestly and disagree with each other without being a jerk, being still nice and respectful. But, you know, honestly, debates, we get to the right decisions.

It's moving fast, being decisive, and it's an M&A play, which means we look at many, many acquisitions at the same time, so we don't fall in love with one of them and overpay. That's the cardinal sin in M&A, is overpaying. That's the IC and ROIC. And then integrating those businesses very thoroughly, so we have one company, one brand that has a power in the marketplace.