QXO, a tech-forward company in the building products space, has recently made waves with its announcement of a $3.5 billion private placement financing. This investment puts QXO on the path to have purchasing power of over $5 billion, positioning the company to potentially acquire large public and private companies. The investments have been described as the largest raise in the history of the building products industry, with Chairman and CEO Brad Jacobs aiming to grow QXO into a $50 billion company in the next decade.
With investors including well-known firms such as Orbis Investment Management, T. Rowe Price, Morgan Stanley Investment Management, Liberty Mutual, Sequoia Heritage, and Madrone Capital Partners, QXO is poised to disrupt the industry with its focus on leveraging technology to grow in the $800 billion building products distribution arena. Industry experts such as John Burns of John Burns Research and Consulting believe that Jacobs’s track record of creating multibillion-dollar businesses quickly will have a substantial impact on the industry. The company’s growth plan involves future acquisitions and a strong infusion of technology to drive innovation and efficiency in the industry.
Industry insiders see QXO’s massive investment in the building products industry as both a bold and logical move. Craig Webb, president of construction supply consulting group Webb Analytics LLC, notes that the United States is currently underbuilt, with haphazard construction processes presenting an opportunity for companies that can serve this market efficiently. While success in the industry has traditionally been attributed to human factors like relationship-building, QXO’s disruptive approach to leveraging technology and making strategic acquisitions has created a sense of fear and uncertainty among competitors.
Grant Farnsworth, president of building products research firm The Farnsworth Group, acknowledges the aggressive growth goals set by Jacobs, with a target of $5 billion within three years. The questions that remain include whether QXO’s solutions will address industry challenges effectively, if there is a strong enough need to support $5 billion in investments, and how quickly the building products industry can adapt to these changes. The timing of QXO’s announcement is seen as opportune by Todd Tomalak, principal of the Building Products Advisory at Zonda, as the industry is transitioning to a new phase with shifting distribution channels and a focus on productivity and efficiency.
As the industry faces changes and potential disruptions, companies like QXO that can deliver products on time and impact labor productivity will have significant pricing power over their competitors. Window and door suppliers struggling with product delivery in 2021 served as a recent example of how disruptions in the supply chain can impact pricing. Tomalak believes that the next five years will look significantly different from the prior 15 years in the building products industry, with QXO’s massive investment poised to drive innovation and efficiency in an industry ready for change.
