Commentary: XPO’s cash and confidence

   Anyone who knows me or reads my stuff for any length of time realizes I like sports. They also know I like to make comparisons between sports and other walks of life. The most natural of those comparisons, of course, is between sports and my day job, covering the logistics and transportation industry.
   So it is through this lens that I viewed a recent presentation by XPO Logistics, the fast-growing freight brokerage, third-party logistics services, and last-mile transportation provider.
   XPO Chief Executive Officer Brad Jacobs is a rock star at presenting the case for his business. No surprise—this is not his first rodeo. Jacobs has gone from being a successful oil broker in the ‘80s to forging a rollup of waste management companies with his first venture (United Waste Systems) to taking the same model to the small rental equipment market (United Rentals). He turned both those companies into raging success stories, including making United Rentals the largest equipment rental company in the world and a multi-billion-dollar concern.
   In 2011, he trained his gaze squarely at the truck brokerage industry, eyeing opportunities to consolidate a fragmented market. That focus quickly expanded to third-party logistics and last-mile delivery services. The result: a company that had revenue of $177 million in 2011 and has since increased to nearly $3 billion by 2014. The revenue target for 2017 is $9 billion.
   XPO has big stakes in freight brokerage, where it’s a top three company by revenue, but has also quickly grown to be the largest provider of last-mile, white-glove delivery services in North America.
   Obviously, that extreme growth has been fueled by acquisitions, but there’s also a healthy dose of internal growth—I say internal because XPO has been active in greenfield starts, which is sort of outside what many companies might consider “organic” growth. Still, the point is this is not all acquisitions.
   There’s a bigger point, however, and this is how it relates to sports. Jacobs’ previous experiences have armed him with two things—cash and confidence. He knows how to roll up an industry, and his past successes have given him the ability to invest and secure outside funding from the market.
   It reminds me of the way oil oligarchs from Russia and the Middle East have invested heavily in European soccer clubs. One, in particular, is noteworthy in this case: Manchester City.
   The club is owned by Abu Dhabi’s ruling family, and run by Sheikh Mansoor bin Zayed bin Sultan, the deputy prime minister of the United Arab Emirates. His title and origin are really not important for the purposes of this comparison. What’s more relevant is the instant financial clout he and his family brought to a club that had teetered on insignificance and despair for decades.
   Since the purchase of the club in 2008, they’ve won two English League titles and assorted other tournaments, not to mention becoming one of the world’s best and most watched soccer teams, with an array of the top players from around the globe.
   It’s a crude comparison, but assembling a world class sports team is essentially like building a top rollup. You acquire similar assets that complement each other well and hope that the sum of the parts equals more than they would individually.
   The rise of XPO and Manchester City also reaffirms another truism in business—sometimes it takes money to make money. Not at the expense of wisdom and expertise, of course, but starting off beyond square one sure helps.

This commentary was published in the April 2015 issue of American Shipper.