DC Velocity - February 2012

other interviews that he has talked to about 100 potential acquirees.

Jacobs said XPO has about $70
million in cash and a $10 million
line of credit that could be expanded
if necessary. The combination of
cash and credit availability should
get XPO through the first phase of
acquisitions and cold starts, which, if
business grows as Jacobs hopes, will
result in a near-doubling of XPO’s
current annual revenue to about
$400 million.

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A MAJOR WAGER

Jacobs’ bet is big and, in the eyes of many, unprecedented. No one recalls a transportation logistics company of this size (XPO is expected to report about $225 million in annual revenue in 2011) achieving a 20- to 30-fold increase in its top line in five years.

“It’s quite a challenge, and it will take a lot of acquisitions to build out the [rev-enue] model and hit those goals,” said Evan Armstrong, president of Armstrong & Associates, a Stoughton, Wis.-based consultancy that follows the third-party logistics and truck brokerage sectors and has done consulting and advisory work for XPO.

Charles W. Clowdis Jr., managing director, transportation advisory services for the consultancy IHS Global Insight, said there aren’t many truck brokers with net revenues—gross revenues minus purchased transportation costs—in the millions of dollars for XPO to roll up into a multibillion enterprise. Clowdis said there might be a large block of owners willing to sell to XPO, but only at an appropriate multiple of earnings that meets their exit requirements.

Then there’s the competition. Besides the established companies like C.H. Robinson Worldwide Inc.—with the industry’s largest brokerage operation— and Echo Global Logistics, truckload carriers are muscling into the brokerage segment as a way to round out their product offerings. XPO could also face competition from the executives of the companies it buys out unless the sellers sign ironclad non-compete contracts, Clowdis said.

Beyond the buyouts and the cold starts, XPO’s success will hinge on everyday execution, namely the ability to maintain and strengthen relationships with shippers and carriers, and to develop a solid IT network that extends real-time visibility to all of its customers and service providers. XPO plans to have one IT platform extending across its brokerage, freight forwarding, and expedited transport businesses.