The Wall Street Journal - 28.10.2019

R8| Monday, October 28, 2019 THE WALL STREET JOURNAL.

JOURNAL REPORTS | C-SUITE STRATEGIES

To develop a rapport with an indi-

vidual who wants to sell a company,

you have to be straightforward. You

have to tell them the whole story of

why I’m interested in buying the com-

pany, what I see as the advantages and

disadvantages of their company, and

explain to them how the negotiation

process would work and how the post-

sale process would work.

I try to develop a relationship with

trust, mutual trust, where neither of

us is going to betray each other.

Sometimes we really want to buy

a company and the person just says,

“I am flattered but I have no interest

in selling. I want to give this business

to my children,” or, “I want to keep

running it until I die or until I’m

much older, and let’s stay friends.

Let’s develop a real friendship, a rela-

tionship. I’ll help you with other com-

panies [you might be interested in].”

But I’ve also had situations where

people said, “I’m very interested in

selling, but not now. I want to create

some value so you’ll pay me a higher

price in a few years.”

And during that period of a year or

two years, three years, we meet, we

talk. We get to know each other. We

see that we’re both honest, we con-

fide in each other. And when they go

to sell it, we can count on each other

doing what we say we’re going to do.

WSJ:Were there mistakes you made,

or deals that in hindsight you realized

might not have been worth doing?

MR. JACOBS:In the first 100 or so

deals I did, I had a much lower suc-

cess ratio of closing than I did in the

next 400 deals because I foolishly

spent a lot of time not calling back

the sellers, not proactively chasing

the sellers, paying too much attention

to posturing and trying not to seem

too eager to do the deal.

What I found was that, you can’t do

deals by ESP. You can’t do them tele-

pathically, and you’re much better off

not causing stress and anxiety and an-

tipathy, frankly, in a seller, by all this

standoffishness.

WSJ:Any other mistakes?

MR. JACOBS:Inmyfirst50to100

deals, I made a lot of mistakes.

Some of those mistakes were not

attaching high enough priority to the

quality of the people. Because you can

take a company that’s sleepy and turn

it into an energetic company by in-

fusing energy and motivation and

compensation plans and getting

people pumped, understanding

they’re part of a bigger thing or a

bigger mission. You can’t buy a com-

pany that’s got a dishonest culture

and turn it into an honest culture.

I bought a garbage-collection

company, and he signed a noncom-

pete. Lo and behold, very soon after

the closing, his daughter opened a

company down the street. And, of

course, she didn’t sign a noncom-

pete, so technically they weren’t

bound by a noncompete. But I guar-

antee you she got her money from

the father whose company we had

bought, and started taking away

the customers that we had just

bought the rights to.

You never can do due diligence

on a company to completion.

There’s not enough time. It’s not

possible. If you bought it from hon-

est people, then you’re highly un-

likely to be negatively surprised.

Ms. Smithis a reporter for The

Wall Street Journal in New York.

[email protected].

That link between credentials and commit-

ment also was clear in the third and fourth

studies. Hiring managers were told that “a reli-

able source” had said the job candidates would

stay at the company for a long time, or that

they had turned down numerous other offers.

Under those conditions, the more qualified can-

didate prevailed most often, Dr. Hahl says.

“The trouble in the real world is that com-

mitment is an uncertain idea that is hard to

quantify,” Dr. Hahl says. “We have standards for

qualifications—credentials, résumés, tasks they

can perform during the interview process. But

commitment is hard to assess before you hire

someone.”

Dr. Hahl suggests that job candidates who

are concerned about being overqualified use the

cover letter during the application process to

showcase something specific about the hiring

organization that resonates with them. “Com-

municate what it is about the firm that inspires

you and has personal meaning,” he says—for

example, mentioning that your mother has an

eye disease, so you really want to work at this

pharmaceutical company because it does re-

search in that area. A personal connection with

the firm might assure the hiring manager that

an overqualified applicant isn’t seeking this job

only for the money or just to get a counteroffer,

and that he or she will put in the extra hours

without being pushed, the professor says.

“Managers are concerned with selecting not

just the highest-ability candidate but the one

who is both capable and committed.”

Ms. Mitchellis a writer in Chicago. She can

be reached [email protected]. FROM TOP: TOM CORBETT; ISTOCK

Early on, Mr. Jacobs says, he spent too much time trying not to seem too eager—and it cost him some deals.

BYJENNIFERSMITH

The Art of

500 Deals

Bradley Jacobs, CEO of XPO Logistics,

explains what he has learned from a

lifetime of acquisitions

B

radley Jacobs is on the prowl for deals again.

Mr. Jacobs, chief executive ofXPO Lo-

gisticsInc., is a serial deal-maker who says

he has bought some 500 companies over

his career, building billion-dollar busi-

nesses in industries from waste disposal to

warehousing.

Mr. Jacobs is known for snapping up

smaller companies in fragmented markets at

a furious pace, a template he used to assembleUnited Waste

SystemsInc. and United Rentals Inc. in the 1990s and 2000s.

Later Mr. Jacobs shifted gears to attempt larger and more

complex transactions. He took over freight-services provider

Express-1 Expedited SolutionsInc. in 2011, renamed it XPO

Logistics, and set off on an acquisition spree that turned it

into one of the largest logistics companies in North America.

Over the next four years, XPO closed more than $8 billion of

deals for businesses that included trucking, freight brokerage

and supply-chain services such as warehouse management

and online fulfillment.

Now, after four years with no acquisitions, the onetime

roll-up specialist is poised to re-enter the fray. XPO recently

said it is kicking the tires again on prospective acquisitions,

nearly a year after a negative short-seller report sent the

company’s stock tumbling and put deal-making plans on ice.

Mr. Jacobs talked with The Wall Street Journal about

what he’s learned from the deals he has made, and how he

has refined his strategy since co-founding his first company

in 1979. Edited excerpts follow:

WSJ:How has your acquisition strategy evolved at XPO?

Have you become more selective?

MR. JACOBS:While I did about 500 acquisitions between

United Waste and United Rentals, [at XPO] we’ve only done 17

acquisitions—only, I say in quotes—[and they were all done]

in four years. We haven’t done any since 2015. They were

larger transactions, on average. And they

were very strategically picked and com-

plemented. From 2010, before I’d incorpo-

rated the company...until 2015, we looked

at about 2,000 acquisition opportunities.

You have to be talking to many, many

different acquisition opportunities simul-

taneously, so that you never feel any

pressure to have to do a specific deal.

You always have a Plan B, a Plan C, a

Plan D. And you’re always comparing the

opportunities and the pluses and mi-

nuses, and the risks and opportunities of

each one, ranking against each other and

internally debating with the team what

are the advantages, disadvantages, if we

buy this one. By having many simultane-

ous discussions going on, we have a

sense of confidence and calmness in our

negotiating because we have other companies we can buy if

that one doesn’t work out. So we get price discipline.

WSJ:How do you go about wooing a target who isn’t neces-

sarily interested in selling, or in selling to Brad Jacobs?

MR. JACOBS:Selling a company is very stressful for many

people. Their identity is wrapped up in it.

They’re very concerned about what am I going to do

with that business and how’s that going to reflect on their

legacy. How am I going to treat their employees, who will

end up being my employees? How will I treat their custom-

ers that they have become friends with? How am I going

to treat the vendors? How’s it going to be perceived in the

community that they live in?

17

Acquisitions

made by XPO

under Bradley

Jacobs since 2011

$8.2

billion

Total cost of

those acquisitions

the company. And that assessment may be as

important as the qualifications themselves.

Oliver Hahl, assistant professor of organiza-

tional theory and strategy at the Tepper School

of Business at Carnegie Mellon University in

Pittsburgh, wanted to understand why hiring

managers don’t always offer jobs to the most

capable candidates. So he and his colleagues

conducted four studies designed to get to the

root of the issue. Their findings were published

online in the spring in the Administrative Sci-

ence Quarterly.

In the first of the studies, the researchers

asked a group of

graduate business

students with hiring

experience to analyze

two applicants for a financial position at

a midtier health-care company. Both ap-

plicants had Ivy League degrees and

worked on Wall Street, but one had been

very successful doing big mergers and

acquisitions, while the other had done

smaller deals. “These two candidates had

the same cultural background, so the

level of experience was the differentia-

tor,” Dr. Hahl says. In almost two-thirds

of the cases, study participants rated the

less capable candidate as at least as

likely or more likely than the highly

qualified candidate to be chosen for the

job. When forced to choose, they said

they would hire the less capable candi-

date more than half the time.

In the second study, hiring managers

were given the résumés of either a

highly or just sufficiently qualified candi-

date and told that each had their commitment

level to the organization assessed and were de-

termined to be “neutral” or “committed.” For

those who were neutral, where there was no

mention of loyalty to the company, the less

qualified candidate was again more likely to be

hired. In talking to the hiring managers, Dr.

Hahl says, one reason given by several for their

hiring decision was that the more qualified neu-

tral person might not stay and would be diffi-

cult to manage. Among candidates who were

deemed committed, the highly qualified appli-

cants were more likely to be hired.

It seems obvious: Hiring managers should
choose the most qualified person for any job
opening. But it often doesn’t happen that way,
leaving some job candidates to assume that
they were rejected because they were overquali-
fied.
They might be right, but there might be
more to it than that. Recent research suggests
that a person’s qualifications for a job—espe-
cially those who have more than the necessary
requirements—affect a hiring managers’ assess-
ment of the applicant’s likely commitment to

BYHEIDIMITCHELL

Credentials

affect views of

commitment.

What Highly Qualified Candidates

CanDotoMakeItMoreLikely

They Will Get the Job