¶ Intro / Opening
Bloomberg Audio Studios, Podcasts, Radio News.
¶ Reconsidering the "Old Economy"
Hello and welcome to another episode of the All Thoughts podcast. I'm Tracy Allaway and I'm Joe.
Why isn't thal Joe we like.
Talking about the old economy on this podcast?
Right?
I don't even think when people use that term old economy, I think it's kind of unfair.
It's funny. I was literally about to respond and say that, maybe, like this whole old economy new economy distinction, it's a little unfair. The old economy is still still here. It's not you know, it's not generative AI, but it's arguably maybe it's even more important the things that we call the old economy. You know, you couldn't have the new economy without without cooling a heater.
This is exactly what I was gonna say, because, like the old economy and the actual business of making things and moving things, heating and cooling is very much enmeshed with the new economy, which is all about generative AI. And in order to have generative AI, you need data centers, right, And if there's one thing we know about data centers, it's that they consume vast amounts of both building material and electricity.
And yeah, heating and cooling. So yes, you're absolutely right, we will no longer use the slur old economy. We will find some other other word. But yes, we like talking about industries in which physical things get built and then sold at a higher profit at a higher price for which they were built from and how how these things actually work.
Yes, indeed, so we are going to be talking about that today.
We also like occasionally talking about deals, and it's not every day that we get to talk about a deal that has literally just been announced and is I think, you know, one of the biggest deals that we've actually seen recently.
That's right, it's a deal to our let's do it.
¶ QXO Acquires TopBuild
Okay, So we do, in fact have the perfect guest. We're going to be speaking with Brad Jacobs. He's been on the show before and he is, of course the CEO and founder of QXO, which has just announced a huge deal to buy a company called top Build in the insulation space. They're paying seventeen billion and at the end of this acquisition, they expect to be the second
largest publicly traded building products distributor in North America. So truly a melding of mergers and again the old slash New economy.
Brad, welcome back to Odd Thoughts. Thanks so much for coming on.
Oh my pleasure. Great to be here.
Congrats on the deal.
The first question I have to ask is is it even accurate to call this an acquisition right now? Because if you're paying seventeen billion for Top build looking at qxo's market cap, you guys are at like seventeen billion as well, This looks like a merger. This is so big, This basically looks like a merger.
Yeah, a merger. I'll go with merger. Mergers fine, put in together two great.
Companies and forming an even greater one.
You know, it's funny, I hadn't heard of Top Build up until you know this morning. We're sorry yesterday when the news came out, there you're going to buy it? You know what I was thinking about, Like, America is incredible, Like this company, so it uh stocked now with the premium that's baked in today trading at four hundred and eighty four, This was a forty three dollars stock as
recently is twenty eighteen. America is incredible, like these companies that sort of fly under most people's radars, can just do. You don't have to be in the videos of the world to make a lot of money.
Well, I agree with that. You have to have a service or a product that there's demand for. Yeah, and you've got to give a great customer experience. And if you have those two things, you'll make a lot of money.
¶ Deal Rationale and Financials
All right, So walk us through the rationale for doing this, because again, like a huge deal, and it seems to have caught a few people off guard. They were expecting you to maybe buy you know, some smaller companies keep the roll up strategy going, but again, this one is very large.
Oh yeah.
So the acquisition of Beacon, following the acquisition of Kodiak, which is followed now by the acquisor to top Build, takes us from eleven months ago where we had no building products revenue, let alone EBITDAH to the second largest publicly traded building products distribute in North America with more than eighteen billion dollars in combined company revenue and more than two billion dollars of combined to justiba DAH. It's
a big deal. It's a big deal in the industry, it's a big deal in the market as a whole. It's very creative to our earnings, meaningfully creative to our earnings. And when you look at the multiples, that's reasonable multiples. We're paying fourteen point nine times twenty twenty five EBITDA pre synergies and about eleven point eight times EBITDAH post synergies, and there's tons of synergies we can get. We're targeting three hundred million dollars or so of synergies over the ne five years.
¶ Brad Jacobs' Entrepreneurial Journey
Just to zoom out for a little bit. Regular listeners, of course, know who Brad is. We've had him on the show several times. But just in case you don't, he is a serial entrepreneur. If there's ever a company and their chicker has XO in the handle, it almost certainly was founded by Brad.
One exception, which one mobile.
You didn't found out way.
You didn't know. I wish I had had I got away, got away.
But it's always these again, I hate words like real economy and old economy, but we can see physical economy, and it's like warehouses and trucking and freight brokerage and construction equipment rental and garbage stuff, like anything real and physical. That's what Brad's into He's found in numerous companies. He also wrote a book came out in twenty twenty four, How to Make a few billion dollars. And the reason I still have this job today is because I haven't
gotten around to reading the book yet. Had I gotten around to reading the book yet, probably be a billionaire by now and I would be doing something different. But I'll get around to doing that eventually. One thing that's interesting though to me just learning about Top Build today. In addition to seeing their stock, they had also been a serial acquirer and in fact, it said like in one of their recent presentations, this has been one of their main strategies. So why don't you like talk about,
like who is this company, Top Build? What do they do? Tell us a little bit about the history and the footprint of this company that you're buying.
¶ TopBuild's Insulation Business
Top Build is the largest installer and distributor of insulation. And as you were just saying that, everybody needs insulation, Every house needs insulation in the walls, every office building needs insulation everywhere. It's a needed product and it's not going anywhere. It's not going to be disrupted by AI
or l lams. It's just not going to go away. Yeah, So when we complete the merger, will be number one in insulation, will be the second biggest in roofing, will be number one in waterproofing, and we'll hold number one or number two positions in certain geographies within lumber and building materials. So we'll have a huge addressable market several hundred billion dollars.
¶ Insulation for Data Centers
So I take the point that everyone needs insulation. This is definitely true, but we allude it to this in the intro. Data centers in particular need insulation. How much of this deal is the expectation that you're going to be getting a lot of business from the data center build out as well.
Oh, we will get a lot of business from data centers, but not just on the insallation. Data centers need roofs too. Data centers need waterproofing very much. So data centers often need lumber related products. So data centers are big consumers of building products. Now, Top Build itself has single digit percentage exposure to data centers, but it's very fast growing.
Wait, sorry say that how much exposure?
Single digit percentage of the revenue, got it? But in terms of growth it's growing very very fast.
Okay, So when we think about the installation market in general. How much is it residential, how much is it commercial? And is there a lot of overlap where do companies tend to specialize in one or the other.
It's fairly evenly split. They have a little more residential than commercial, but they have both. Okay, they have both, and we have that as well, by the way, in the two companies we bought before this, Beacon and Codiac, we have residential customers, we have commercial customers, we have industrial customers, these municipal customers. Everybody needs building products. If there's a building, it's made of building products.
And just to be clear on the nature of the business they do installation within the insulation supply chain, where do they sit exactly? Do they manufacture it or is it just distribution and installation?
Like what do they do? They don't manufacture, Okay, they buy it and then they either resell it at high price to a contractor or they actually install it. They sell it and install it and to various cuss cotomercial.
Okay, well, now I have a dumb question, but is there a quality differential when it comes to insulation, Like is there a particular type of insulation that a data center would need versus your run of the mill house.
There's not too many different types of insallation, but there are different types, and the big manufacturers are ones like Owen's Corning or john Mansville or canalf Is another big one, So you know, big companies and very high quality stuff. So insulation has been around for a long time, but technology makes it better and better every decade.
¶ Domestic Manufacturing Regulations
Where's it made insallation?
It's mostly made in the United States, is it? Yeah?
This seems to me. I was surprised. I remember the last time we talked to you about like roofing, and you mentioned how much shingle is still made in the US. Talk to us about like why is that? Why is this a particular type of good that is still largely What are the economics of it such that it still makes sense to manufacture it in United State?
It's more about regulations, okay, So the types of building products, the regulations, the codes are different country to countries. So insallation in Europe is not quite the same as installation here. Roofing products in Europe not quite the same as it is over here. So waterproofing same thing, so slightly different rags and that makes it better to manufacture closer to where it's being used.
¶ Due Diligence in Acquisitions
So how did Top Build actually get on your radar? Did you initially approach them? Did they approach you?
We approached them? How did that actually we approach them first?
Yeah?
Okay, So now I'm very curious because I know you have a lot of experience in M and A, and you know, a lot of people would describe your business as basically a roll up for building materials. But I also know from reading your book, and by the way, Joe, I am not yet a billionaire, but I did read the book. You have a very a very specialized process when you target a company to acquire them, including having a former CIA intelligence officer, one of the guy who I think like worked with live.
He was on your podcast.
Yeah, yeah, yes, yes, so did he did?
He interview all the CEOs and they all went through background checks and that sort of thing.
So so we do background checks. But we spent two days in our lawyer's offices here in New York and about fifteen members of the senior management team of Top Build came up, including the CEO and CFO, And yeah, we interviewed each one for like an hour and a half and got to know him and it checked out. Everything they said was true.
I love that interview to you guys for an hour and a half, it's like, here's seventeen billion dollars. Sounds good. Now there's a I'm sure it's a little more complicated than that. What else goes in in the due diligence process. Do you go around and talk to customers?
Oh? Yeah, so talk to us about that. Well, we have a lot of the same customers, have a lot of the same vendorsk big, big overlap. So top Bill is a very well known company. It's the number one company in its field, so it's pretty easy to check them out. So we knew what we were getting before we did those interviews over two days. But still you
want to talk to the people. You want to find out where are the skeletons, and what are the risks, and what are the good things, and where's the opportunities and where's the upside and what are some things you can bring to the table, particularly in terms of technology, that could turbo charge the growth of the company. So those in person meetings are very important. It's not the only part of due diligence. Do a lot of stuff online.
You do a lot of stuff with third party channel checks, but those in person meetings with the management team are absolutely crucial. I would never buy a company, any company without doing management interviews. That's the most important part of due diligence.
It's funny.
I was hanging out with some people over the weekend and I was hearing about some deals that they were doing in the AI space, including a pretty large deal that apparently they completed in an afternoon. And you can imagine what the due diligence process is on a deal that's completed in a single afternoon.
I don't know how to do that yet.
That's over my capabilities, but it doesn't take a long time. We're surgical and not overly intrusive in the due diligence, but the afternoons a little tighter.
¶ Deal Valuation and Market Softness
So what made you comfortable with the premium? Because again, twenty three percent on the existing share price of Top Build, that's a pretty you know, that's a pretty nice amount of money.
It's a fair price. It's not a terribly high price. It's not terribly low price. When you look at multiples of EBIDAH, it's fourteen point nine times twenty twenty five EBITDAH pre synergies and about eleven point eight times EBITDAH post synergies the expected synergies. So now it's reasonably priced. It's a lower multiple than we trade at, which is very important because that's where you get the accretion, the
accretion to earnings per share. This is going to be a massively accreative transaction for us.
Talk to us about setting aside, like setting aside this aquigition, which we'll come back to. How does business feel over the last year, you know, just general economic conditions in the building materials distribution world. What's been the last year?
Like super soft? Super super soft? Now super soft? Because demand in general in building and construction is soft as weak, and we're not immune to that. But we've mostly been in roofing up until recently. Now, roofing is a special animal because it's extremely affected by weather, meaning bad weather. You want to have. Bad weather is good weather for roofing, so you want to have you want to have this sleet and a lot of hailstorms and hurricanes and tornadoes.
And I gotta tell you there's a lot of cognitive dissonance about that because all my life. I've watched television. You see a hurricane, like normal people, unless you're a sociopath, you feel bad. You feel, wow, it's too bad that these people are getting there.
Wait, have you become a sociopath for you?
No, no, no, no, definitely not becoming a.
Social no, hell no, hell no.
But my point is this, if a normal person watches television and sees a people's houses getting the roofs being blown off, usually you feel bad about that, You feel compassionate, you feel, oh, wow, it's too bad for them. Yeah, so there's a dissonance here because that's really good for the roofing business. One half of your brain is still a human and compassion and feeling bad for this on the other side of your Yeah, great, I gotta storm,
gonna hail storm is not fantastic. These people's roofs are all go flying off, We're gonna get more business. So that the good or bad news, depending on your perspective, is in twenty twenty five, there really weren't any big storms. There weren't any name storm, big hurricanes, tornadoes, so that
was bad. And compounding on that in the first quarter here you had the bad kind of bad weather which is snow and other bad weather that just slowed everything down, just stop business, but didn't create any demand from roof damage exactly. So the external conditions haven't been great. Now that said, I don't care because I'm not building a business for one year or two years or three years like I did in my previous companies. I'm building a strong, durable,
iconic company that's going to be around for decades. And that's what I think. We're always thinking about long term. We're thinking five ten years. We're not thinking about a quarter or the year. If we have a choice on a decision for capital allocation or m and A or investments. We barely think about how's it going to affect this quarter this year. It's really how's it going to affect the long term?
¶ Economic Factors & Long-Term Strategy
Were you impacted by the tariffs at all? Did that complicate the existing business?
Not too much, because in roofing, which is what we've been up until Kodiak and our top Build, almost all of it is manufacturing in the United States, sold in the United States, or manufacturing Canada or sold in Canada, and we really don't have business overseas, so the terriffs didn't really affect us. Now it might have affected demand, distry production overall, it might have affected how much construction was happening, But directly we were not clauborate by the tariffs.
The weather collaborate is a lot more than the terraffs.
What is the main commodity input for an insallation?
Oh, it's chemical. It's chemically created and it's refined in a manufacture with a lot of people looking like chemists.
So like, is it petrochemical? Like if like oil prices were to surge, would that be a sort of like margin crimping factor for insulation prices.
Well, I think we're better off with oil prices lower for demand, not so much for the cost of the goods, but lower oil prices there's more confidence and more demand. But the real factor for building products is mortgage rates. So mortgage rates when they were seven and a half percent was really bad because people had three percent mortgages or three and a quarter percent mortgages, and people just have a problem paying off at three percent mortgage and
taking out a seven percent mortgage. They're now down a bit six and a half percent, but they got to come down more so when the Iran war finally ends and it'll end someday and interest rates come down, which they will under this administration. It's pretty good odds that mortgage rates will come down and business will start booming.
Yeah, this is what I wanted to ask, which is I guess financing availability at the moment, because clearly we are in the midst of this Iran situation and we
¶ Capital, Synergies, and Cross-Selling
have seen some very volatile markets out there. We've seen traders start to ratchet down I guess their expectations for a rate cut later this year. What's financing been like for you at QXO.
We have no problem getting access to capital. That's not been an issue for us. We've raised since I started the company almost a couple of years ago. We've raised something like fifteen billion dollars and fairly easily on this transaction here. In addition to that, we've got seventeen billion dollars now. Part of that but roughly about fifty five percent of it is going to be in the form
of stock, but the other's cash and raise it. We got debt commitments from Morgan Stanley and from Wells Fargo and from Barclay's and pull that all together about a week.
Is synergies when you talk about the future cost savings. Is that a euphemism for layoffs?
No, just the opposite is to grow the business, is to figure out ways that you can cross sell customers. A contractor who is selling roofing is used is buying roofing and putting that into their construction. Pretty good chance they're going to want insulation in what they're building too.
So we also sell windows and doors, for example, and all of our customers have some issue, some exposure to windows and doors and will be number one in insulation, number two in roofing, number one in waterproofing, and number one or number two in the key geography served within lumber building materials. There's a lot of cross selling between insul, roofing, waterproofing, and lumber.
We'd say more about that because you know, we hear from executives all the time when they talk about synergies and kind of general terms. But what exactly is I guess, the low hanging fruit in this particular deal, Like, what is it that you're able to do from day one versus what you're able to do in like a year or two.
Well, the first thing that we do when we go into buy a company, whether it's Top Build or anybody else is. We meet with as many people as we can and we ask them to just step back, get out of their normal comfort zone and think about what would be the perfect circumstances and tools and techniques and repositioning the company to growing faster. Where are their pain points? Where are things that are holding them back? And we collaboratively put together a business plan. Now I already know,
like with every other acquisition we've done. Ever, technology is going to be the first thing. Technology today slows people build down in the market. They've got to get the latest technology, the greatest warehouse management systems, which we'll bring to the table, the greatest TMS, transportation management systems, the greatest ERP, which is also using a CRM that's AI generated to empower the sales force to get productivity up. Technology is the number one enabler of synergies. But there's
going to be so many synergies here. The cross selling is a big one. There are some cost savings when you're a bigger player. We're going to be the second biggest publicly traded building products distributor. We will get because we deserve a better price from the manufacturers. I mean, bigger customers get bigger discounts, bigger rebates than the smaller customers. So a building products distributor, like any distributor, makes money by buying products as cheap as possible and then selling
them that reasonable price. That's a markup from what you're buying. These are the two main things you're buying and you're selling now. In the meanwhile, under that, you have to manage your costs. Make sure your costs are efficient and lean and not wasteful and not inefficient. We can do that too, but that's not really where you make the money. You don't make the money on slashing costs. That's what private you guys do. That's not what I do. What I do is I invest in the business. I invest
in the people. I invest in their learning and development, invest in their training, I invest in their careers. We tie the compensation to results. We figure out what are the right KPIs to keep performance indicators, what are the right metrics that are that mark success in this business, and then we tie the compensation to that and let people, out of self interest, do great for the company and create organic revenue growth on the top side, and then margin expansion on the bottom side.
I love a business. There's just buying something and finding an opportunity, you know, buying something, assembling it, making it so nice, and then selling it for more. It's old fashioned, It's honest. I respect it a lot. I'm glad that you mentioned the alphabet soup of different types of enterprise
¶ AI Boosts Corporate Productivity
software that a business has. One of the biggest themes, as you know, in the market this year really maybe over the last six months, but definitely in the last year, is this idea that the relationship between businesses and their software vendors is going to change and the reason for this is AI and maybe you know, maybe some businesses that didn't have that expertise in the house, like maybe we'll build this solution on our own rather than hire,
et cetera. Sitting aside this deal right now. Has your in the last year, has your relationship with software vendors? Does it feel like the leverage is changing things to AI? Whereas maybe you at the negotiating table when you're re uping negotiation for seats, et cetera, where you have a little bit more you can cancel deals or get better pricing, talk to us about what's going on.
Not really I mean a lot, a lot of our technology is homegrown. We have a lot of people we've hired from Microsoft and from other big.
Sure, but you're not like building your own like payroll software, right.
Well, we still we still outsourced.
That's what I'm saying, Like that there's a lot of anxiety in the market that all these legacy companies that do something simple like payroll a look at you've seen their share prices. I don't need to show them to long.
Term job that's true. Long term that's true, okay, but long term that's true for pretty much every job and every industry in every company is AI and robotics and automation is going to disrupt quite a number of jobs. But having said that, the productivity of the economy is going to be so much greater that we can afford to have more free time and still enjoy nice lifestyle. So I'm not worried about that.
No, not worried, But I do have What I'm saying is like, are you exploiting? Like do you have any opportunities to like are you a beneficiary of these tools? Oh? Yeah, challenge talk about yeah?
Absolutely. So I've been a CEO since nineteen seventy nine. It's the only job, the only job you've ever had. I've never been more productive by a long shot than I am right now. Reason being, we have AI taking notes of all the important meetings around the company. So at the end of the day, I can get a dozen readouts of AI generated summaries everything that's going into the company. Stuff that in the old days before we have the AI note taking either it wouldn't reach to me,
or would reach me. It wouldn't reach me, or it would take two or three months before it got to me. So as a CEO, now you know what's going on in the company, all over the company right away, in real time. And when you have longer meetings, the AI will do sentiment analysis. The AI will look at trends. We can do customer surveys, employee surveys using AI. That so powerful now, I mean you can get real good analysis from it. It's it's hugely powerful. So you can
see where this is going. AI is going to make Corporate America far more efficient than it is right now. Everything that's measurable will be measured, analyzed and then suggesting how to improve it in real time. It's very exciting. Time to be alive and be in the corporate world.
¶ M&A Strategy and Avoiding Overpayment
Just going back to the QXO business. So I know I keep saying this is a very big deal, and it is, and it immediately vaunts you to, as we said, the second largest publicly traded building products distributor in North America. As you get bigger and as you make more of these acquisitions, you know fairly quickly you've done like three or four now in a little over a year, I think, or maybe a little less than a year. Do you worry about antitrust at all?
Well, we're not at a point where our market share is so huge that it would have any effect on raising prices to the customer, So no, I don't worry about that right now, all right.
So on that note, what does the universe of potential targets look like to you right now? And should we expect that your next deal is going to be quite as large?
Well, we have a big pipe and we're always talking to many, many acquisitions at the same time. A big mistake a lot of roll ups do, or even corporate acquires, is they kind of dabble in M and A. They don't have like a scientific, organized process, so they work on one deal, they fall in love with the deal, and they overpay. It's like the biggest crime, the biggest mistake you can make as an acquirer is to overpay. People say, oh, well, don't worry about it, you'll forget
about the purchase price the next day. Well, your balance sheet never ever forgets the purchase price. That's money that you've wired out of your account. It just someone else's account not coming back. So you got to watch the purchase price quite closely.
What's your advice? You know, Like, one of the things that I'm aware of over the last ten fifteen years is the rise of like I think they're called like search funds or something. You get like some guy who's like an MBA. Maybe at warton they don't know what they want to do. They raise some money for their friends and they're like, we're gonna go buy this local like pool supply company or whatever, HVAC, and we're going to like six sigmad up and then we're going to
make some money, et cetera. I think you're probably a god to these people because you have the art of buying companies down as a practice. Where do you see them go wrong? Typically, what would be your advice to these types who think, you know what, I'm going to buy an old fashioned business and make it run great. Where do you see people go wrong in this?
Most of them go wrong. Most of them go wrong because they're really not operators. They're really just promoters. They're financial guys, and that's fine, but they don't integrate and optimize the businesses. Now they can still make money on
the spread. In other words, you see some of these smaller roll ups they buy a bunch of companies that whether veterinarians or car washes or whatever, and they buy them at single digit multiples, and then suddenly they're one hundred to two hundred million dollars of the bidah and they say, wow, I'm a big company. I should get a double digit multiple. And oftentimes that works. That's not
how we make money. We make money on yes, buying companies at a lower multiple than we raise capital at, then integrating them, optimizing them, and proving them, making yourself more valuable to the customer, make yourself a real exciting place to work for the employees, making a real good, long term business plan that creates value for everyone in
the ecosystem. That's not what these smaller rollups do. These smaller roll ups are really simply playing the arbitrage between what they buy on small companies and then aggregating them to get a higher multiple.
You know, I asked you if the synergies were euphemism for layoffs, and you quickly shot that down. You know, one of the things that Warren Buffett said from time to time is like people who like family owned businesses, some of these smaller businesses they like selling to Warren Buffett. They felt like, Okay, this company that I've worked with a built for a long time, it's going to be in good hands. Maybe you'll give Warren Buffett a slightly
better price than the other guy who came knocking. Do you feel like, from your perspective, it's important that the would be seller they like you, that they feel that this thing that they work to build is going to be in good hands, and is that part of your long term strategy?
Yeah?
I do.
When you're selling a company, it's kind of emotional thing. I mean, you're not going to sell a company for like twenty percent less just because you like the guy. But you don't necessarily go with the highest bidder every time Now, it depends who you are. If you're private equity owned, yeah, you probably will go with the highest bidder because you're going away and you really don't care. If you're a privately owned company by a family, you care very much about who you sell the company to
because it's your legacy. Then maybe there's relatives, there's local communities. It's a big deal. They want to make sure that you're going to be good steward for something they've built up over ten, twenty, sometimes thirty years. So yeah, it does make a big difference.
Yeah, I'm going to put you on the spot now.
But when you were negotiating on the top build deal, what was like the biggest sticking point that you had to haggle out. What was the biggest point of contention.
Well, it's always price, because the buyer wants the lowest possible price and the seller wants the highest possible price. But we found a compromise, We found something in the middle that was fair for them and for us. That was really the main sticking point. The other stuff we saw eye to eye. The very similar culture is a lot of different ways that good operators. We're good operators. They've done a lot of M and A. They've done
a few dozen deals that built up the company. We're big in M and A, you know, as you know, I've done about my teams and I have done over five hundred acquisitions. So there's a lot of stuff in common that we had a lot of mutual affinity and respect over By the.
Way, I know this is no longer your thing anymore, but I'm just looking at some of the other companies in the the Exo family XPO that stuck is on an absolute ear and I've been seeing trucking is like kind of back, like trucking is hot these days. Can you talk a little bit about what's going on in freight?
¶ Industry Cycles and Management Matters
And obviously, even though it's like your main focus these days, I'm sure your business touches freight every single day. Why is freight so hot?
Again, Well, freight isn't so hot across the board. Okay, some companies are still, you know, not not doing so well. In that Now XPO, under Mario and Mario Harrek leadership, it's doing fantastic. I attribute that mainly to Mario and the team. The execution of the business plan has been fantastic, just laser like surgical getting the damages down, getting the on time up, improving the customer experience. It's just an
amazing job at it. It's just executed very very very very well on that and that's why the stock has performed so well. But it's management matters in any company, in any industry. Management matters a lot. You can have a strong management team who understands how you make money, has the nose for money, has the analytical capabilities of knowing what's important and what's not important, treats their employees right, treats their customers right, treats their vendors right, and they'll
make a lot of money. And you'll have the same exact business across the street with not so sharp management. They don't treat their customers right, they don't treat their employees right, they don't treat their vendors right, and boom, this company doesn't do so well. So management matters matters a real lot.
But again, I know you're not, you know, on a day to day basis with XBO now, but do you get the sense that the trucking cycle has turned that maybe? Yeah, a meaningful uptick in frame.
There are several important Guruz analysts in the industry experts in trucking who have called a turn in the last couple of months. We'll see, you know, a couple months doesn't make a trend yet, but at the time it has looks like it's inflected. It looks like there's more goods moving, there's more freight moving. Industrial America's starting to get a little bit better, there's more palettes on the road. It looks like trucking has gotten better. But it's early days still.
I just have one last question. I guess it's basically about the business environment. It's so obviously interest rates are going to be a huge factor out of your control though, et cetera. So what can you do about it, whether out of your control, oil price is going to be a factor, or energy price is going to be a factor in any sort of real goods space, another thing
that's out of your control. But like, here's the weird thing, and I think a lot of people have like this is the hard thing that a lot of people have a hard time reconciling, which is that like the last couple of years, maybe the last several years, last couple of years, they've felt pretty chaotic. There's obvious, there's a war going on right now. We had this huge trade shock last year, et cetera. Some of the tariffs gout water are down a little bit, but it's still a
high level of uncertainty. And you know, we know consumer sentiments pretty negative, et cetera, and even business sentiment when they read the regional surveys not that great. And yet by and large, corporate America seems to be doing well and make a ton of money. And you wouldn't necessarily know, especially if you look at the stock market, that there
is all is this uncertainty going on. Do you feel a relationship between like the chaos that you read about in the news and the choices that businesses make on the day to day to either invest or not.
Of course, so all the things you mentioned, energy prices, interest rates, et cetera. That affects business. So in terms of capital allocation, that really matters. Now, you can always make money if you've got a smart management team. In every part of the cycle, the top, the bottom, of the middle, there's always a play. There's always way to make money. Now, it's different in different parts of the cycle.
When things are depressed, you can buy back your stock, you can do m and A multiples are really high. You can make a dividend and use stock for stock deals with companies. So there's different plays at different parts of the cycle. But people have the nose for money. We'll be able to figure out how to make a buck in any part of the cycle.
I got to read your book, all right, Brad, We're going to leave it there, but thank you so much for coming back on all thoughts to explain the latest deal.
Really appreciate it. Oh wait, I should ask.
Before we let you go. Any hints on the next target. You have roofing, you have waterproofing, you have insulation, what's next, Tracy.
We don't look at just one thing at a time.
That's what we that's our MO in terms of M and A is look at cast a wide net, talk to lots of different acquisition candidates at the same time, move them all all forward ahead like a funnel, and see who gets the finish line. That way, you're relaxed about it. You don't have a gun to your head about a specific deal. So it's not like I'm being coy and not telling you the next deal. I don't know. We're looking at lots of different things. We'll see when and which company that stars line up for.
All right, Well, I can tell you in the Northeast a lot of people are looking at wood burners at the moment because the cost of heating oil has gone up quite a bit. So maybe that maybe there's something there there you go. I'm saying this out of my own self interest. Okay, Brad Jacobs, thank you so much for coming back on a los plea mine, Joe. Did I tell you last year a big XPO truck got stuck in our driveway?
You should have asked Brad about that. Oh, he's not like I think it's his responsibility.
But I did think it was pretty funny.
I resisted the urge to call him and send a photo of this giant truck like stuck in the mud, but I felt bad for the driver.
Does your place in Connecticut need insulation?
Yes?
It does.
Actually, so I'm a potential customer, and I'll be watching what happens with pricing after all these synergies very closely, yes, but always interesting having a hat on. And I do think he approaches he seems to approach M and A a little bit differently to a lot of other people.
Well, it's interesting to think about. Like, one thing I really have come to appreciate talking with him is the degree to which, like hes he mentioned, he's done O our five hundred deals, So it's like, what is he what are you really good at it your company? For him, the thing that he really is into this deal is buying other companies, right, Like you get the impression that there are like companies where it's like, Okay, the main thing that we do is we sell roofing materials, and
from time to time we might make an acquisition. But it's also pretty clear that from his perspective, like the acquisition process is part of the sort of the core competency of any business that he actually runs, which I find to be pretty interesting.
Yeah.
Absolutely.
And the other thing that that was interesting about that conversation is that AI build out Yeah yeah, and the idea that like, Okay, at the moment, data centers might be I think you said single percentage of top builds business, but growing very quickly, and so you could see the potential there.
And also like the idea we just talked about it a little bit. But I've never been to CEO of a really big company, but I've managed a time smaller teams within a company, and like one of the trickiest things is like having like true visibility into the operation, you know, et cetera, and I know you know, and so like thinking about like as like, Okay, the CEO could see everything to some extent, summarize structured in some
way at a level that was pretty that's different. It'd be interesting to talk more with someone just about how being a CEO having a line of sight into your own business is changing in the world of like AI note taking and stuff like that.
Yeah, no, totally.
I mean it sounds like it's changing pretty last for what Brad was saying, Okay.
Well shall we leave it there, Let's save it there.
This has been another episode of the Authoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
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