XPO's Brad Jacobs talks SilverSun acquisition, equity growth

XPO Logistics (XPO) Executive Chairman and serial entrepreneur Brad Jacobs joins Yahoo Finance Live to detail his approach to building companies, most recently through acquiring and scaling SilverSun Technologies (SSNT).

Jacobs explains why he avoids SPACs, seeing no "fair alignment" in the model. Instead, his method is injecting $1 billion into a small-cap company and then spinning it back to legacy shareholders, leaving him and other investors with a billion-dollar public entity.

Sitting down with Julie Hyman and Josh Lipton, Jacobs outlines his ideal ownership layout and why he targeted SilverSun. He also discusses the sectors he looks to operate in through his holding companies.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JULIE HYMAN: Billionaire Brad Jacobs, founder of five publicly traded companies, like freight transit company, XPO, and the world's largest equipment rental company, United Rentals, well, Brad's back at it again with a new investment vehicle. Alongside minority co-investors, he's going to funnel $1 billion into software firm Silversun Technologies. That cash will then be used for acquisitions at a later date. And Jacobs will become the chairman and CEO of Silversun.

He's here with us right now. He's still chairman of XPO. It's great to see you, Brad. You also, by the way, oh, in your spare time just wrote a book, "How to Make a Few Billion Dollars."

BRAD JACOBS: Thank you for reading it.

JULIE HYMAN: Yeah, sure. So first, I have to ask you, because we have talked, and I knew that you were looking for your next chapter.

BRAD JACOBS: Chapter.

JULIE HYMAN: I wasn't even doing that on purpose. So why structure it in this particular way? So it's interesting, because you are buying this company effectively. But you're going to get rid of what it does now and make it do whatever you want it to do. But why do this versus, say, a SPAC or another kind of investment vehicle?

BRAD JACOBS: I don't like SPACs, from the point of view of I don't know that there's a real fair alignment between the promoter, so to speak, and the investors. They don't put any money in usually. And they get 20% off the top. What I'm doing is something very different. We're actually putting-- we're putting our money where our mouth is. We're putting a dollar billion into a very small-cap company. It was $15 or $20 million market cap as a few days ago.

And then we're going to spin back that company to its legacy shareholders. We're going to give them a little dividend, $2.5 million. We're going to give them a little taste of the new company, like less than half a percent. Then we'll be left with a publicly traded company with a billion of cash in it. And we're off to the races.

JULIE HYMAN: And how do you pick this one? I mean, could it almost have been any company? I mean, what criteria then because you're getting rid of that fundamental business?

BRAD JACOBS: I like the fact that it was small. So we had less dilution. You remember with XPO, we did a similar concept, where we had a company called Express-1, which is where the ticker XP, Express-1, came from. And we put $150 million into it. We did a pipe into it. And we got about 70% of it.

We had a lot of dilution with. 30% made billions of dollars on our backs. So this time, we're going to have over 99% of the company from the beginning. So it's small size actually was a benefit to us.

JULIE HYMAN: OK. So businesses you've done so far, oil brokerage, waste management, logistics, and now--

BRAD JACOBS: Equipment rental.

JULIE HYMAN: Equipment rental, a small one, I forgot. So what's this one going to be?

BRAD JACOBS: I'm not going to tell you. But I will describe in general what I've been looking for over a year and what I'm soon going to announce, but not today. I look for large industries. All the industries you just mentioned are ones that are hundreds of billions of dollars in size. Some actually even over $1 trillion.

Why? Because I want to create a company that's tens of billions of revenue. So I can't go to an industry that's only tens of billions of revenue or else that's not realistic. So I look for large, large industries, ones where there's lots of companies to buy, where I can do acquisitions and where it makes sense to do acquisitions. In other words, where 1 plus 1 plus 1 equals more than 3. And I have found an industry that I'll announce soon that meets those requirements.