Promising to turn a $175 million-a-year company into a $5 billion one in just five years is a pretty audacious thing to do.
That”™s what XPO Logistics Chairman and CEO Bradley Jacobs did while speaking to a group of executives in 2012, shortly after gaining control of the Greenwich transportation and logistics company. Jacobs”™ promise proved to be mistaken.
It”™s the kind of mistake that most would give their eyeteeth to make. Instead of $5 billion, XPO Logistics ended its fifth year under Jacobs”™ leadership with revenues of $14.7 billion.
According to XPO”™s third-quarter results, released on Nov. 1, quarterly revenue was a record $3.89 billion, compared with $3.71 billion for the same period in 2016. XPO Logistics stands as the third-largest publicly traded U.S. logistics company, behind UPS and FedEx.
How did Jacobs get it so wrong?
“That”™s a good question,” the 61-year-old Rhode Island native said with a laugh at XPO”™s 5 American Lane headquarters. “We focused on building and maintaining a well-organized company with really great people, staying focused on our business plan and executing it well.”
That plan involved making key acquisitions via what Jacobs called “reasonable deals,” and integrating them into XPO”™s existing technology and sales culture.
“It really all fell into place,” he said, “and it went faster than I”™d originally thought.”
NOT HIS FIRST RODEO
Perhaps those quick results should come as no surprise. Jacobs ”” who in 2011 gained approximately 71 percent ownership of what was then called Express-1 through his Jacobs Private Equity LLC, which remains XPO”™s largest shareholder ”” has founded five companies and led each of them to become a billion-dollar or multibillion-dollar concern. Over his career, he”™s led teams that he estimates have completed about 250 cold starts and 500 acquisitions.
In 1997, he founded United Rentals Inc. in Greenwich. Within 13 months it had become the world’s largest equipment rental company. Over the 10 years he ran it, the company reached $3.9 billion in revenue, with more than 700 branches and 13,000 employees. Jacobs left United Rentals in 2011 when the company merged with RSC Holdings Inc.
In 1989, Jacobs founded United Waste Systems in Greenwich. The company had made more than 200 acquisitions by 1997, when he sold it to what is now Waste Management Inc. for $2.5 billion.
Before his string of business successes in Greenwich, Jacobs in 1984 had founded an oil trading company, Hamilton Resources (UK) Ltd., growing it to annual revenues of approximately $1 billion by the time he quit the business and returned to the U.S.
He had ventured into the oil industry as a 23-year-old in 1979, when he co-founded Amerex Oil Associates Inc., an oil brokerage, and served as its CEO until the New Jersey-based company was sold in 1983. By then its annual gross contract volume had grown to about $4.7 billion.
“This isn”™t my first rodeo,” Jacobs said at his office in Greenwich.
THE LURE OF TRANSPORT LOGISTICS
He was first attracted to the transportation logistics industry, he said, when he realized that it was the one common denominator in all of his previous businesses.
“They were all to some degree about moving commodities from one place to another,” whether equipment, oil or waste. “Wherever you look, whether it”™s health care, finance or aerospace and defense, transportation and logistics are a key part.”
Acquisitions have played a large part in XPO Logistics”™ growth. The world”™s third-largest freight brokerage firm and provider of intermodal services and the largest provider of “last mile” logistics for heavy goods, the company grew in part through the 17 acquisitions closed to date under Jacobs”™ stewardship. He said the majority of those deals were made to reshape XPO as a one-stop shop for supply chain services across various geographies and customer verticals.
AMONG THE MOST NOTABLE ACQUISITIONS
Ӣ National Logistics Management, acquired in December 2013 for $87 million, making XPO Logistics the largest manager of expedited shipments in North America.
Ӣ Pacer International Inc., the third-largest intermodal provider in North America and the leading provider of intermodal services between the U.S. and Mexico, acquired in March 2014 for about $335 million in cash and stock.
Ӣ French logistics group Norbert Dentressangle, a leading contract logistics provider in Europe and owner-operator of the largest truck fleet in Europe, acquired in June 2015 for $3.53 billion.
Ӣ Con-way Inc., the second largest less-than-truckload transport provider in North America, acquired in October 2015 for $3 billion.
INTEGRATE, STAY HUMBLE
Jacobs said his philosophy about acquisitions ”” besides “choosing the right company” ”” is to integrate it as much as possible within XPO, rather than simply gobble it up and ignore the possible consequences.
“I”™ve done a lot of acquisitions over the years and we have a management team in place that”™s long in the tooth when it comes to acquisitions,” he said. “But I don”™t ride in on a horse and say that I”™ve got all the answers. There”™s knowledge and relationships (at the existing companies) that are extremely valuable.”
“There”™s a sense of humility” that XPO strives to maintain with its acquisition targets. “We go in with an open mind, and try to respect all of our employees. We use our ears more than our mouths.”
Today, XPO operates a network of more than 91,000 employees in nearly 1,500 locations in 32 countries. Of its 415 Connecticut employees, 119 are in Fairfield County, including 78 at the 34,000-square-foot Greenwich headquarters.
MORE BUYS AHEAD FOR XPO LOGISTICS
“Acquisitions are not in our life at the moment,” Jacobs told analysts during a February conference call. That has since changed.
“The key phrase there was ”˜at the moment”™,” he said with a smile. “Our management team is always figuring out the most important things to spend our time on, and then that becomes what we spend our time on.”
With $665 million in newly raised cash, Jacobs said XPO could spend as much as $8 billion in acquisitions, though he doesn’t expect to close a deal until the first quarter of 2018 at the earliest.
“We”™re very picky. We looked at over 2,000 acquisitions and selected 17 to buy. What we”™re looking for is an entrepreneurial, honest, growth-oriented company that”™s bottom line-focused and tech-oriented.”
Jacobs said that mergers and acquisitions is “just one part of the story” at XPO, with technology also playing a major role. The company spends about $425 million each year on tech, he said, largely to differentiate it from competitors like UPS and FedEx.
Examples include the use of drones for counting inventory, robots “working side by side” with product pickers to fill customer orders and predictive analytics software, which Jacobs called “our secret sauce.”
Working closely with its base of about 50,000 customers worldwide, which include 65 of the world”™s 100 largest companies, is also key to the company”™s growth, Jacobs said. “We help them move their goods through the supply chain in the most cost-effective, efficient and predictable way we can.”
“Can a delivery be made in days or weeks? The answer to that can result in shipping by plane, truck or rail,” all of which XPO provides. That capability has saved its customers “tens of millions of dollars,” Jacobs said.
RIDING E-COMMERCE
E-commerce is a growing factor in XPO”™s growth. In its third-quarter results, the company reported the e-commerce and industrial sectors accounted for the largest gains in its North American revenue, which increased from $544.4 million in the third quarter of 2016 to $628.6 million this year.
“We”™re also number one in the U.S. in last-mile logistics for heavy goods,” Jacobs said, adding that XPO completed 13 million such deliveries last year. “Five or six years ago, people weren”™t buying refrigerators, stoves, exercise equipment and furniture over the internet. That”™s no longer the case, and we”™re benefiting from it.”
XPO is also girding for what its retail customers expect will be a record holiday season. Based on XPO”™s predictive analytics and customer surveys, “We think they”™re right,” Jacobs said, “so we”™re hiring and training people and opening more fulfillment centers. Europe is the same way ”” we”™re hiring 6,000 in the United States and Canada, and 5,000 in Europe, primarily in France, the U.K. and Spain.”
TEAMSTER LABOR TROUBLES
Jacobs declined to comment on the company”™s labor conflict, which made news in late October when XPO withdrew recognition of the Teamsters union as the bargaining unit for 124 workers at its North Haven contract logistics operation. That move came after 73 workers petitioned the company to request that Teamsters Local 443 be removed as the workers’ representative. Typically, workers seeking to drop union representation vote to decertify the union rather than submit a petition to their employer.
Teamsters spokesman Bret Caldwell said XPO Logistics workers and the Teamsters local in New Haven filed numerous unfair labor practices charges with the National Labor Relations Board before the workers”™ petition was submitted to the company. XPO was accused of bad-faith bargaining and of inappropriate involvement by management in the decertification campaign, Caldwell said.
“This is not a quick process,” the Teamsters spokesman said. “However, we anticipate winning these charges and the company being required by the government to return to the table.”
ONE-YEAR PROJECTION
Jacobs anticipates XPO being “bigger and more profitable” a year from now, increasing its full-year adjusted EBITDA from an expected $1.365 billion this year to at least $1.6 billion in 2018.
“To achieve that growth, we just need to do two things, the same two things we”™ve been doing for a while now. And that”™s mid-single-digit organizational growth along with an expanded profit margin of 100 basis points, which we”™ve achieved over each of
the past three years,” Jacobs said.
What does this mean for the employees? Are y’all taking care of them like you should be? My husband has been there 15 years. We see the growth, we read about it all over the news. I’ve never seen anything mentioned about values, taking care of thier own etc. You want to provide big efficient product to the customers…that starts inside the business. That starts with those that clock in and out. I sure would love to see undercover boss come into xpo. Give us that news article. My husband is a rockstar. He’s a supervisor. Worked his way there. He puts in long hard hours and I’m not certain he walks in proud everyday. Start there. You have your 14 billion now invest in the humans that got the company there.
He does not really care about the people that got him there. Spent 21 yrs as a Mgr. only to find that out the hard way. When i say him i mean his culture he builds within his management teams. The take no prisoners approach. When you have given your all over the years and can no longer give any more you are discarded like trash. Replaced with younger cheaper help with no concern with what happens to the people that built the grass roots business. Thats the reality.
EBITDA,EBITDA,EBITDA.With record earning he should share the wealth.Instead insurance copay went up ,deductable went up, disability went from 2 week wait to 4 week wait,c overage dropped from 66 % to 60 % and many terminals losing key personnel.High freight damage claims.Lipstick on a pig.Look at the letters in EBITDA ,it also spells debt.
This os a horible shipping company they sent a shipment across Texas twice and the to california and across texas again before ariving 4 days late
It’s all smoke and mirrors folks. Remember Enron and Quest. XPO’s house of cards will fall and the poor employees will suffer.
Now that we are making all this money lest make sure it gets passed down to the employees . I would like to thank xpo for bringing back the company match. I’m I firm believer when a company is making money everyone should get a piece of the pie. Keep the employees happy and and they will go that extra mile for you and we can all grow together . We need newer equipment pallet jacks hand carts. . We need some more uniforms too. Let’s grow together. We also need paid sick leave .
Amen…..XPO is at the bottom of the logistical chain when it comes to wages and hourly associates. I worked there too long to get slapped in the face with a $.25 raise that’s was long waited on for over three years…Associates work there ass of working long hours day in and day out to only walk away with less than $600 dollars a week for 50+ hours while this jerk off CEO boasts about how he makes the company all this money..Try showing your employees that actual make the company money some love and a real increase in there checks
EBITDA, EBITDA, EBITDA, EBITDA, record profits, you would think he would share the wealth.Instead ,some healthcare premiums increased,deductables increased,yearly total increased,SDI went from 2 week wait to 4 week wait and went from 66‰ to 60%.Key personnel are leaving terminals,and freight claims are up.Lipstick on pig.If you look real close at the word EBITDA you also see the word DEBT.
This idiot had managed to ruin the best ltl company in the business in a very short amount of time! It is disgusting what we have become from what we once were! There is a special pace in hell for people like this that ruin the lives of great, hard working people for his own ego and prosperity!
I drove for Conway for 17 years. Quit in April 2016. Went to work at ODFL, best move ever!!
Décidément que penser de toutes ses informations que nous donne notre cherman Jacobs. On a presque envie d’y croire mais la réalité est toute autre. En France, nous rentrons en négociations annuelles obligatoires, on verra bien si l’humain fait partie de la croissance de notre cher groupe. Cela fait 2 ans que la participation n’a pas été au rdv. La première année, la grande partie de la logistique en France s’est mis dehors pour reclamer ce quils ont durement travailler et pa peur de recommencer l’année dernière, on a fait l’aumône de 500 euros pour éviter la grève. Ce n’était pas bon pour les actionnaires.
Qu’attendons nous cette année ? Pourtant on pourrait croire qu’avec tous ces beaux résultats, le salarié xpo soit récompensé par tant defforts surtout lorsqu’on sait quel genre de travail font ces salariés et surtout rétribué avec des salaires de misères.
Je demande donc à notre cger président de faire un effort pour tous ces salairies qui portent xpo à ce niveau de croissance.
I hope the Union forces him to the table and he is made to pay his employees better pay, benefits, and treat people like human beings. He is a real selfish person, don’t let that smile and words fool you. Glad he departed from Conway Truckload when he did, now called CFI, I don’t miss him as a driver one bit.
You LTL drivers may have some valid complaints but accept that you are a relatively mid sized division of XPO Logistics at this point. Contract Logistics and Last Mile are the money makers. Get over it and buy some shares.
Bunch of whiners……. it’s America, folks, so you’re free to leave. Always blaming somebody else for your problems. It gets old.