Logistics Company Case Study

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XPO Logistics, Inc. (XPO)
BRADLEY S. JACOBS is the Chief Executive Officer of XPO Logistics, Inc. A career CEO, he has led two public companies. United Rentals, Inc., which he cofounded in 1997; and United Waste Systems, Inc., founded in 1989. Mr. Jacobs served as Chairman and CEO of United Rentals for the company's first six years, and as Executive Chairman for an additional four years. He served eight years as Chairman and CEO of United Waste Systems. Previously, Mr. Jacobs founded Hamilton Resources (UK) Ltd. and served as its Chairman and Chief Operating Officer. This followed the cofounding of his first venture, Amerex Oil Associates, Inc., where he was Chief Executive. Mr. Jacobs is a member of the board of directors of the Beck Institute for Cognitive Behavior Therapy.

SECTOR - TRANSPORTATION (AWJ601) TWST: Please start by introducing our readers to XPO Logistics with a brief company history and an overview of its operations today. Mr. Jacobs: XPO Logistics is a non-asset-based transportation services provider in the logistics industry. We don't own any trucks, airplanes or ships. We're a middleman between shippers and carriers who outsource their logistics to us as a third-party broker. We reported $177 million of revenue in 2011, and we expect to reach our target of a $500 million revenue run rate by year end. Since taking control of XPO last September, we've put a strategy in place to grow the company to several billion dollars in revenue over the next few years with brokerage as our main focus. Our strategy has three prongs, all of which are in progress. Number one is acquisitions. We'll continue to acquire attractive truck brokerage operations that are scalable. Number two is cold starts. We'll continue to open greenfield locations, mainly truck brokers, throughout North America. And third, we are optimizing our existing operations. In eight months, we've completed two acquisitions and 12 cold starts, seven of which are in truck brokerage, and we've grown our existing operations in our three business segments of freight forwarding, expedite and truck brokerage. We've also put together a management team whose skill set matches this ambitious plan. TWST: Would you talk a bit more about the company's most recent acquisition, Keh-on Logistics, in terms of why that was an attractive acquisition target and a good flt for XPO? Mr. Jacobs: We purchased Kelron Logistics in early August. It's a $100 million revenue truck broker based in Canada with offices in Toronto, Vancouver, Montreal and Cleveland. Keh-on has built up strong relationships in the industry over 20 years. The first thing we did was to connect the Kelron team to our national operations center in Charlotte, which is providing them with access to more trucks. We're using this additional capacity to help grow our share of wallet with Kelron's long-term customers. Next, we'll migrate them to our technology platform. 94 The Wall Street Transcript - October 1, 2012

and then we're going to grow the business by adding salespeople at each of their locations. We expect Kelron's relationships and history to enhance the entire XPO system both in terms of pricing and finding trucks. TWST: I believe it was in the spring that XPO Logistics had a common stock offering. How well was it received by investors, and more broadly, would you describe the company's access to capital and its strategy for financing growth and acquisitions? Mr. Jacobs: In my previous companies, the teams I led raised over $6 billion of debt and equity, mostly in the public markets. Here at XPO Logistics, our business plan is to grow a large company with a smaller capital base, something in the hundreds of millions of dollars. Our first transaction was to invest up to $150 million into Express-1 Expedited Solutions, Inc., which was already a publicly traded company. We completed that transaction last year in September, and we tapped the public markets to raise another $ 137 million in a...
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