Brad Jacobs on His Big Bet on Building Insulation
Brad Jacobs, serial entrepreneur and CEO of QXO, discusses his $17 billion acquisition of Top Build, the largest insulation installer and distributor in North America. The deal transforms QXO from having no building products revenue 11 months prior into the second largest publicly traded building products distributor in North America. Jacobs outlines his M&A philosophy, synergy targets, and long-term growth strategy across insulation, roofing, waterproofing, and lumber.
Summary
In this episode of Bloomberg's Odd Lots podcast, Brad Jacobs joins hosts Tracy Allaway and Joe Weisenthal to discuss QXO's landmark acquisition of Top Build, following earlier acquisitions of Beacon and Kodiak. Jacobs explains that in roughly 11 months, QXO went from zero building products revenue to becoming the second largest publicly traded building products distributor in North America, with over $18 billion in combined revenue and more than $2 billion in combined adjusted EBITDA.
Top Build is described as the largest installer and distributor of insulation in the country. Unlike manufacturers, Top Build purchases insulation from major producers like Owens Corning, Johns Manville, and Knauf, then either resells it to contractors or installs it directly. Upon deal completion, QXO will hold the number one position in insulation and waterproofing, number two in roofing, and top-two positions in key geographies for lumber and building materials. The deal is valued at approximately $17 billion, with roughly 55% in stock and the remainder in cash, financed by debt commitments from Morgan Stanley, Wells Fargo, and Barclays.
Jacobs discusses the valuation, citing 14.9x 2025 EBITDA pre-synergies and 11.8x post-synergies, with a $300 million synergy target over five years. He emphasizes that synergies will come primarily from cross-selling across product categories, technology upgrades including AI-driven CRM tools, warehouse management systems, and ERP improvements, as well as better pricing leverage with manufacturers due to increased scale. He explicitly distinguishes his approach from private equity cost-cutting, emphasizing investment in people, technology, and long-term growth.
On market conditions, Jacobs acknowledges that 2025 has been a soft environment for building products, hurt by a lack of major storm activity that typically drives roofing demand, and by early-year weather disruptions. He notes that mortgage rates remain a key constraint on residential construction demand. Tariffs had minimal direct impact since most building products are domestically manufactured, though they may have indirectly suppressed demand.
Jacobs also touches on the data center opportunity, noting that while data centers currently represent only a single-digit percentage of Top Build's revenue, the segment is growing very fast and requires insulation, roofing, waterproofing, and lumber products. He briefly discusses the trucking market, crediting XPO's strong performance under CEO Mario Harik to exceptional operational execution rather than a broad freight market recovery, though he notes some early signs of a cyclical upturn.
On AI, Jacobs describes how he uses AI-generated meeting summaries and sentiment analysis to maintain real-time visibility across his organization, calling it transformative for CEO-level management. He argues that while AI will disrupt many jobs long-term, the resulting productivity gains will benefit the overall economy. He closes by describing his M&A process as highly disciplined, running multiple acquisition targets simultaneously through a funnel to avoid overpaying, and conducting in-person management interviews as the most critical part of due diligence.
Key Insights
- Jacobs claims that within 11 months of having zero building products revenue, QXO became the second largest publicly traded building products distributor in North America through three sequential acquisitions — Beacon, Kodiak, and Top Build.
- Jacobs argues that insulation is a near-ideal acquisition target because it cannot be disrupted by AI or technology, serves every type of building, and is largely manufactured domestically due to country-specific building codes and regulations.
- Jacobs states that data centers currently represent only a single-digit percentage of Top Build's revenue, but that this segment is growing very rapidly and requires insulation, roofing, waterproofing, and lumber — making it a multi-product opportunity for QXO.
- Jacobs describes a dual cognitive dissonance he experiences as a roofing business owner: human compassion when watching storm damage on television conflicting with the business reality that hurricanes, hailstorms, and tornadoes are the primary demand drivers for roofing products.
- Jacobs argues that the biggest mistake acquirers make is overpaying, noting that unlike popular wisdom suggesting you forget the purchase price quickly, your balance sheet never forgets and the money wired out never comes back.
- Jacobs contends that most smaller roll-up operators fail not because of bad strategy but because they are promoters and financial engineers rather than true operators — they capture multiple arbitrage but do not actually integrate or improve the businesses they buy.
- Jacobs describes his due diligence process as including two full days of in-person interviews with approximately 15 members of the target company's senior management, which he calls the single most important part of any acquisition process.
- Jacobs claims that AI-generated meeting summaries and real-time sentiment analysis have made him more productive as a CEO than at any point in his career since 1979, giving him immediate visibility across the entire organization that previously would have taken months to surface.
Topics
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