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Serial deal maker Brad Jacobs looks forward to a looming U.S. recession while he hunts for another takeover. “It’s a good time to do my next big thing,’’ the 66-year-old billionaire explains. “A downturn creates buying opportunities for acquirers with capital like me.”
Jacobs has done more than 500 takeovers during his long career, typically by swallowing smaller players in fragmented markets. He stepped down this fall as chief executive of XPO Logistics, the transportation giant he built through aggressive acquisitions and organic growth.
He remains executive chairman of the Greenwich, Conn., company, focused on its less-than-truckload freight operation following the Nov. 1 spinoff of XPO’s freight brokerage into a separate, publicly traded entity called RXO.
The executive says he can now spend most of his time pursuing a fresh target—perhaps a financial services, healthcare, homebuilding, or special-purpose acquisition company. (SPACs buy businesses and effectively take them public.)
Jacobs also founded or co-founded four companies in the oil, waste disposal, and equipment-rental industries. Each grew into enterprises with at least $1 billion in annual revenue. In 2011, the entrepreneur gained majority control of Express-1 Expedited Solutions, a freight-services provider with a market value of about $72 million that he renamed XPO Logistics. Its market capitalization peaked at $16.8 billion a decade later.
Jacobs, a math and music major at Bennington College and Brown University, never completed his degree. Music offered the trained classical pianist lessons relevant to business, such as “when to go fast and when to go slow,” he adds.
TIME recently spoke with Jacobs, about possibly reinventing himself via a $30-billion company, cures for clogged supply chains, and integrating takeovers successfully.
The interview has been condensed and edited for clarity.
How soon will another recession hit America and how badly might it hurt XPO?
It is a near certainty that we’re going to go into a recession over the next few quarters. It could be deeper than people might be expecting. But I am optimistic it won’t last long.
A downturn is a negative thing for the transportation industry because growth of a transportation company in part depends on the flow of goods. We continue to invest in our business regardless of where we are in the economic cycle to be well-positioned when economic activity starts to pick up again. Our biggest secret is proprietary technology, which has been a big part of our growth. [It] is of immense value during a healthy economy and a not so healthy economy. That allows us to grab market share profitably.
You reinvent yourself every decade or so. But you’re now 66. Will your next reinvention be your last hurrah before retirement?
I doubt that. I was born to be a CEO. The job matches my skill set just perfectly and gives me a lot of satisfaction apart from the money. I’m going to do my very best to be as busy as possible until the day I die. For the most part, it’s going to be as a CEO.
Yet you aren’t CEO of anything today. Maybe that’s why you’re eager to do another deal soon. Why are falling SPACs on your shopping list?
I’m looking at dozens of SPACs that were $10 a share and are now a fraction of that. I’m not interested in most of them because I don’t see where significant growth is going to come from. Scalability is the most important thing I look for when I get into an industry. For me, growing a company dramatically is a prerequisite to creating tremendous shareholder value. But with my extra billion dollars on their balance sheet and me as their dynamic new CEO, I could see some of those SPAC companies becoming very big companies.
Might you instead acquire a very big company with spectacular growth potential?
That’s harder to do when you’re already big, but not impossible. M&A is a lot like having kids. It’s very hard to plan exactly. You have to be patient and disciplined. I’m in a hurry to do the right deal, something that I’m confident will create tons of money for my shareholders. But I’m not in a hurry to do the wrong deal.
My next acquisition could be something that’s only a couple hundred million dollars in revenue. Or it could be something that has $30 billion of revenue. I would devise a business plan to grow its profitability. I don’t necessarily have to buy 100% of a company. I could invest a billion or billion and a half dollars so I have a significant shareholder stake and then become CEO.
During the recent supply-chain crisis, XPO helped unsnarl bottlenecks for customers in several industries. What moves are you making that will benefit your customers when the supply chain clogs again?
We’re doing many things that should have tremendous positive effects for years. We’re now spending significant [amounts] getting more trucks. We nearly tripled our production of trailers. Our driver training schools will probably graduate twice as many new drivers this year than last year. All these things primarily create more capacity. We’re able to process more freight for customers, and that helps unsnarl customer supply chains.
Between 70% and 90% of acquisitions fail, often due to poor integration. What’s the most important step you took to successfully integrate 500-plus acquired businesses?
I respected the people who came with the acquisitions. The single biggest mistake that acquirers make after buying a company is that on day one, they think they have all the answers. Guess what? They don’t. [Employees] feel disrespected, and many leave. It’s foolish to think you’ve got all the answers before you’ve asked the people actually running the business every day what makes this company great and what’s holding the company back that should be done differently.
In the early days of an acquisition, we use our ears and eyes a lot more than our mouths.We want to unleash great ideas that team members have had that never got their day in the sun. We solicit very valuable input from people on the front line and at all levels of management. You create a culture where people realize they are rewarded to speak up and say not just good things, but also difficult things in a respectful way. People feel empowered. We get an avalanche of extremely valuable insights that we almost always use to modify the business plan we had based our purchase on.
Mario Harik, your successor as XPO’s chief, was among your first hires there, and you undoubtedly groomed him to assume command. How should other companies better prepare internal contenders for the corner office especially when its present occupant wears huge shoes?
Create a deep bench of executives whom you expose to all the key things going on in the company, even if it’s not their direct responsibilities. The several dozen top executives learn about all different aspects of running a company, so they understand other senior executives’ techniques and practices. It becomes an in-house education. [That’s] the way we ran XPO over the last decade. I never siloed executives, like you see in most companies. We created a big bench of CEO candidates. Look at Drew Wilkerson, now CEO of RXO. He benefited tremendously from seeing how other leaders were managing their businesses inside the company.
How will you avoid micromanaging Mario while serving as XPO’s executive chairman?
Mario does not need any micromanaging. He’s much smarter than I am. In terms of mentoring, I will continue to be part boss but largely his colleague, peer, and sounding board. I [also] serve as kind of a therapist, counselor, advisor, and friend. I’m not going to be intruding more than I should. I will let him be the CEO.
What special skills do young people need these days to succeed in business if they imitate your example and lack a college degree?
Education is important for someone coming into the workforce who has ambitious career plans. Do they have to get a degree? Not necessarily. But they have to cultivate an attitude of wanting to be a lifelong learner. You also need to learn to write. You’re not likely to become a CEO of a multibillion-dollar company if you have poor grammar. And generally speaking, you have to work your tail off to be very successful in business.
Years ago, you wanted to call your garbage business Jacobs Waste Systems. But your father disliked that idea and so you named it United Waste Systems instead. Will you put your surname on the next business that you buy and grow?
For me, business has never been about ego. It’s about making money for shareholders. If putting my name as part of the company name helps with creating shareholder value, I’m more than happy to do it. I’m big on accountability. People should dream big, set big goals, be very specific [about] the milestones, and then be visible in holding yourself and your team members accountable for progress you’re making. When you put your name on a company, it says, “I take responsibility for everything that happens in this company.” It shows the reputation and fortune of the company [are] as important as your own personal reputation, fortune, and success.