AI Summary
5 min readBrad Jacobs on His Big Bet on Building Insulation
"America's incredible," Brad Jacobs says, pointing out that TopBuild—the company he just agreed to buy for $17 billion—was a $43 stock in 2018 and now trades at $484. "These companies that sort of fly under most people's radars can just do... you don't have to be in the Nvidia's of the world to make a lot of money."
Jacobs, the serial entrepreneur behind XPO, United Rentals, and other industrial roll-ups, is back with his biggest deal yet. His company QXO is acquiring TopBuild, the largest installer and distributor of insulation in North America. When the merger closes, QXO will be the second-largest publicly traded building products distributor on the continent, with more than $18 billion in combined revenue and over $2 billion in combined adjusted EBITDA.
What TopBuild actually does
TopBuild doesn't manufacture insulation. It sells it and installs it. The big manufacturers are companies like Owens Corning, Johns Manville, and Knauf. TopBuild's business is roughly evenly split between residential and commercial customers, and its core products—insulation, roofing, waterproofing, and lumber—are not going anywhere. "It's not going to be disrupted by AI or LLMs," Jacobs says. "It's just not going to go away."
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What you'll learn
- 1 (04:17) **Deal Announcement & Overview** - Brad Jacobs announces QXO's $17 billion acquisition of Top Build, describing it as a merger of equals that creates the second largest publicly traded building products distributor in North America.
- 2 (08:07) **What Top Build Does** - Top Build is the largest installer and distributor of insulation, a necessary product that "isn't going to be disrupted by AI."
- 3 (09:01) **The Data Center Angle** - Data centers are a fast-growing customer segment for Top Build, though they currently represent a single-digit percentage of revenue.
- 4 (10:18) **Insulation as a Made-in-USA Product** - Unlike many goods, insulation is mostly manufactured in the United States due to differing regulations and building codes between countries.
- 5 (12:01) **The Due Diligence Process** - Brad describes his surgical approach to M&A, including two days of in-person interviews with 15 senior Top Build managers.
- 6 (16:38) **The Premium and Valuation** - The 23% premium on Top Build's share price is described as a "fair price," not terribly high or low.
- 7 (17:19) **Current Business Conditions: Soft and Storm-Dependent** - The last year has been "super, super soft" for building and construction demand.
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Show Notes
He's done it again. On Sunday night, building supply company QXO announced that it would be acquiring TopBuild for $17 billion. TopBuild sells and installs insulation for both the residential and commercial markets. For Brad Jacobs, the CEO of QXO, this is just the latest in a lifetime of deals he's made. In fact, he's made over 500 deals in his life across numerous public companies that he's founded, most of which have XO somewhere in the ticker. Brad's companies all tend to be highly focused on the so-called "old economy" or real physical world, but of course, as we've seen with the datacenter boom, the old economy is still hot and crucial. So we talk about the logic behind this deal, how the insulation market works, and the general state of the building supply market right now.
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