QXO CEO Brad Jacobs explained his strategy for investors in an interview that ranged from accomplishments since acquiring Beacon Roofing Supply, mergers and acquisitions, tech stack needs, pricing and procurement, and building the QXO leadership team.
QXO launched a brief bid to acquire Rexel in September of 2024, only to have its $9.4 billion bid rejected without further negotiation. In April of this year, QXO acquired Beacon Roofing Supply for $11 billion. Beacon has locations in all 50 states and Canada, and at the time of the acquisition had more than 8,000 employees. Jacobs has a long-term goal of $50 billion in annual revenue in the construction distribution industry. Beacon is on track for $8 billion in revenue this fiscal year, after reporting $1.9 billion in revenue in the second quarter of this year.
Beacon Roofing Accomplishments
Jacobs said he could list “a hundred things” that have been accomplished since the April acquisition, but limited himself to the 15 that were asked. They included rebranding across computer touchpoints, flattening the organizational structure, accelerated rollout of a centralized digital pricing platform, planned deployment of a modern warehouse management system, and launching pilots embedding AI into quoting, routing, and sales workflows.
Mergers and Acquisitions
Jacobs describes QXO as “disciplined buyers” with a focus on intrinsic value. Jacobs said, “We do not pay for synergies, but we do consider how much we can improve the businesses we acquire.” Jacob changed his base for doubling profits from 3 years to 5 years, but will allocate capital responsibly.
When asked about Home Depot and Lowe’s, Jacobs called them “extraordinary companies” and focused on their M&A activities. Jacobs admitted both could probably outbid QXO if they go after the same acquisition because both are much bigger. Jacobs described the M&A landscape as a “big ocean and there are a lot of fish in it.”
This year alone, Home Depot and Lowe’s both acquired drywall distribution companies.
Tech Stack Needs
Jacobs was honest about his assessment of the distribution industry and tech, saying, “Although there are a handful of companies in this space doing progressive things with technology, overall, the building distribution industry is way behind on tech. We’ve seen companies running dozens of ERPs with outdated systems, manual processes, and limited inventory visibility.”
Jacobs says QXO is implementing “best in class” systems, some custom made, and upgrading its entire tech stack. Jacobs described the QXO leadership team as exceptional leaders who were hired from elite operations in procurement, operations, and finance. Jacobs says he has also invested heavily in sales force training, agentic AI tools, and other forms of sales enablement.
Pricing and Procurement
Calling procurement in his industry “fragmented and unsophisticated”, Jacobs says distributors do not achieve proper economies of scale. In addiction to investing in advanced analytics, QXO has rolled out a digital pricing platform, replacing manual overrides with centralized guardrails that have already addressed about “$200 million of leakage”.
In terms of inventory, the strategy is to win market share not by discounting price, but by “being in stock”, quoting quickly, and delivering on time and in full.
Jacobs pointed out that if 4% of its SKU inventory accounts for 80% of sales, but those fast-moving inventories are often out of stock, it will be a problem. “If you want to turn a current customer into a former customer, keep telling them you don’t have what they want in stock,” Jacobs said. “The focus is to always be in-stock, in every branch, on A-list items.”
Tagged with mergers and acquisitions