Brad Jacobs, founder, chairman and CEO of XPO Logistics, has created five billion-dollar or multibillion-dollar companies. They include four publicly traded corporations — XPO Logistics and its 2021 spin-off, GXO Logistics, United Rentals and United Waste Systems. Jacobs has delivered tens of billions of dollars of value for public shareholders along the way.
We discussed his recent success at XPO and XPO’s spin-offs, the lessons he’s learned about getting the value from M&A activity, and how to build winning teams.
Karen Walker: You started XPO with a $150 million investment in 2011, and it is now a Fortune 200 company. Can you describe that journey?
Brad Jacobs: Essentially, the vision was to become, through a combination of M&A and organic growth, a $5 billion company. We thought that would be an aspirational goal that would give us a certain critical mass and status in the industry. Fast forward to a couple of years ago, we were $18 billion in revenue.
I’m leaving the CEO role in a few months; I'm going to be executive chairman and do another startup.
Walker: So many companies struggle to find a successor when the very successful founder or CEO leaves. How did you prepare and choose your successor?
Jacobs: There are three successors, and the choices were easy. In the case of Mario Harik, Mario was the third person I hired back in 2011, and we both shared a vision of automating brokerage and replacing human involvement with technology.
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Malcolm Wilson is running our spin-off GXO (pure play contract logistics). The third successor will be Drew Wilkerson, who will run RXO, the truck brokerage business we are spinning off.
All three of these guys have very different backgrounds. One is from the UK, another from Lebanon, and the other from South Carolina. Despite this, they share certain leadership qualities.
They're super honest and possess integrity. They're also extremely hard-working. I encourage them not to work so hard. All three are married to the business. And they're very intelligent. I like to hire people who are smarter than me.
Walker: You’ve started five companies from scratch. Each one has grown into a billion or multi-billion-dollar company. What are the significant lessons you would share to create that kind of success in business?
Jacobs: I measure success on many different levels.
One is shareholder value creation because we're a for-profit business. So, if we stay true to our knitting, we create significant shareholder value. I haven't calculated it for XPO, but investors who believed in me invested at $7 a share. And today, including the share dividend for GXO, we're trading at about 15 times that, about $108 a share. I think that's the most critical test for a CEO - how much value did you create for the people who own the company?
We also created companies that made sense for customers who had a choice. Customers could choose to do business with us or select someone else. They could choose to give us a significant share of their wallet or a small spend.
We positioned ourselves in ways that made us valuable by listening to the customers, analyzing the market, figuring out what's the need that we're going to fulfill, and being clear about what we bring to the table.
We hired fantastic people. That's the critical ingredient. You need, of course, a great industry and strategy, but you also need amazing people like Malcolm, Mario and Drew.
Walker: As part of the success in these organizations, you've made over 500 acquisitions. That is an astonishing number. What's your philosophy? What are your filters regarding purchases, and how do you make them successful?
Jacobs: That's an important question, but I’ll try to be succinct. To create successful value from M&A activity, you must start with a compelling, strategic reason. Why you are buying this company?
What is it bringing to us that we can't do ourselves? And how does it fit with the existing business? Will the cultures be compatible?
Making the acquisition is the easy part. Integration is the challenging part.
You must make that company part of you. You can’t have two separate companies. We rip off the band-aid. We integrate very quickly from an HR perspective, a tech perspective, a sales outlook, a customer-facing perspective, and from a culture perspective. Our culture changes every time we make an acquisition.
We don't impose our culture on the company we bought. We’re buying a company because it’s great. And we like to keep and maintain those amazing qualities and cross-fertilize them to the acquiring part of the organization.
The last thing we'd want to do is impose our rules on them. People would naturally feel disrespected, and a lot would leave. And the ones who don't, won’t get all jazzed up about working hard.
The company we’re acquiring helps us build the roadmap. No one knows more about the company than the employees. We ask questions and listen very respectfully and carefully. We ask what we should not change in this company. We ask what's made this company great. We want to know, “What's your secret sauce?”
Walker: How do you keep that going after the integration?
Jacobs: We're constantly soliciting feedback from the organization. We send out electronic surveys to everyone who has an email. We just ask a few simple questions, such as, “What's your level of job satisfaction on a scale of one to 10?”
We ask, “What's your single best idea to improve the company?” Again, we get tons of great ideas.
Sometimes we ask another question, “What's the silliest thing the company's doing?” That's an important question to ask, too, because inevitably, we find out that we're all doing dumb stuff. It’s very actionable intelligence.
Walker: More than 75% of M&A activity fails to deliver on the value. I often say that many people get paid to make an acquisition but not so many people get paid to make it work. You pay a lot of people to make it work. And that’s the idea going in – and you deliver the value.
It looks like every decade or so, you move on to the next new thing. I'm curious, how do you decide what’s next?
Jacobs: Networking. I talk to everybody. I talk to lots of friends, a lot of people in different industries, other CEOs and bankers.
Walker: If you have a team, a playbook and curiosity, there's almost nothing you can't do. And you've got those three, for sure.
Jacobs: I'm going to zero in on curiosity. You never want to get to the point, no matter how old you are, where you think that you know it all. I consider myself a student. I'm always learning.
There's so much to learn. I've been doing this since I was 23, and I'm 66 now. As a CEO of many companies during that time, I never mastered any industry. So, you must stay very alert and humble about it.
Walker: The tagline for my business is “up and to the right” because that is the spot on the two-by-two matrix where we always want to be. I wonder if there was a moment earlier in your career when you knew that you were moving in that direction?
Jacobs: I've never taken for granted that we would be successful. I always thought that we better stay sharp because unexpected things can hit us, and things can go wrong.
That kind of anxiety has kept us alert. Fear of failure has been a good thing. It's been healthy not to take success for granted. We can’t rest in our laurels, and we will continue to prevail because things change.
This interview has been edited and condensed for clarity.
