What QXO’s investment of 1.2 billion means in the diversified construction materials industry
QXO, a leading distributor of roofing and building products, is approaching another acquisition as part of a game plan to disrupt and consolidate the $800 billion diversified building products industry and reach $50 billion in annual revenue in five years or more.
By rebuilding the unconsolidated market place and holding the largest distribution share, QXO can gain market share from competitors, creating significant leverage in negotiations with real estate developers. Being a dominant player in the distribution of building materials to the workplace will reduce competition, strengthen QXO’s bargaining power, margins, access to information and data, and profitability.
This consolidation of potential in the distribution of construction materials will reflect the same trend that is occurring in housing construction. Large homebuilders continue to hold a large market share in high-performing housing markets, leading to greater concentration at the top of the food chain.
It is not clear whether QXO can play this consolidation game in the construction materials industry. However, founder, Chairman, and CEO Brad Jacobs has a proven track record, developed in the transportation and equipment rental sectors among others, that he believes will serve as a template for achieving this goal. QXO, founded by Jacobs in 2023, currently has annual revenue of more than $10 billion and aims to reach $50 billion by 2030 to 2035.
The Home Depot again Lowe’swith total sales of $159.5 billion and $83.6 billion, respectively, as of 2024, they are the only majors in the construction materials industry. Webb Analytics’ 2025 Construction Supply 150 reports that five other companies in the industry had more sales than QXO in 2024:
- ABC Supply ($20.7 billion)
- Builders FirstSource ($16.4 billion)
- Ferguson ($15.25 billion)
- Sherwin-Williams ($13.18 billion)
- Menards ($12.87 billion)
QXO’s vision is to surpass its competitors and become the third largest player in the industry behind Home Depot and Lowe’s. To achieve that goal, Jacobs plans to make a series of acquisitions and double the revenue of those acquired companies within five years of each deal closing.
Apollo’s investment in QXO
As an adrenaline boost to that goal, yesterday, QXO announced a $1.2 billion investment from a group of investors led by its affiliates. Apollo Global Management, Inc.
The financing will come in the form of a series of perpetual convertible preferred stock. This preferred stock can be converted into shares of QXO common stock at an initial conversion price of $23.25 per share, according to a press release. At the time of writing, QXO stock is up nearly 18% to over $23 per share.
A person familiar with the deal, who spoke on condition of anonymity, confirmed it Builder’s Day that QXO is closing in on another acquisition and is considering at least one of seven potential targets. Potential acquisitions are a combination of companies with revenues between $1 billion and $1 million and exchange deals with companies with revenues between $5 billion and $20 billion.
The investment agreement with Apollo states that QXO must fund at least one acquisition by July 15. However, the investment commitment will be extended up to 12 additional months if the acquisition is announced but not completed by the deadline.
QXO’s tech-savvy acquisition strategy
QXO’s technology-focused strategy, led by its chief artificial intelligence officer, focuses on acquiring traditional distributors and consolidating them into a single AI-driven digital platform to improve efficiency and healthy margins.
Jacobs, who has a net worth of over $16 billion, has successfully and profitably pursued this technology integration strategy in other industries such as oil, waste management, and equipment leasing.
However, Ken Pinto, the founder of Kenzai USAhe recounts Builder’s Day that there is a barrier to using this strategy in the construction industry, where demand data is fragmented and often non-existent. Subcontractors often place orders only days before they need materials; many still rely on manual processes such as fax, and there is limited visibility into predicting future demand.
“I think [Jacobs] will do a great job of integrating, integrating and using technology to improve internal operations,” Pinto said. “I’m sure that will go well. He already knows how to do that. He will connect and play. That will be easy.”
However, Pinto says, “Then you’re going to face the hurdle of needing signals to know how much inventory you should have, and finding out, ‘oh, that data doesn’t exist in our industry.'”
Still, Jacobs is confident in his ability to advance QXO’s acquisition targets. QXO, a distributor of roofing, siding, waterproofing, and other building products, acquired Beacon Roofing Supply in April 2025 for $11 billion in an all-cash deal.
In a presentation to investors last year, Jacobs noted 15 ways QXO made Beacon Roofing Supply more efficient, including creating a national call center focused on inactive accounts, increasing the number of best-selling opportunities, choosing a single ERP for the entire company, and using digital tools to reduce the number of price jumps.
The Beacon deal was QXO’s first and only acquisition, and was a milestone in Jacobs’ goal of consolidating the diversified building products industry. Shortly after acquiring Beacon, Jacobs tried to make a purchase GMS for about $5 billion, but Home Depot ended up buying the company last September for $5.5 billion.
Some industry participants are concerned that Home Depot and Lowe’s could limit QXO’s future acquisition opportunities. However, analysis by Reuben Garner and John McGlade at The Benchmark Company argues that QXO is well positioned for its next acquisition.
“With the combined acquisitions of Home Depot and Lowe’s each made in the past 12 months, we believe there is a window for QXO to find its next asset with less competition than some investors fear,” the analysts wrote.
Craig Webb, President of Webb Analytics, notes that there are opportunities to locate building products at reasonable prices. This is partly due to weak lumber prices, an abundance of baby boomer owners looking to sell their companies, and major economic headwinds wreaking havoc on the construction and remodeling industries.
“Ultimately, construction supply companies depend on how many homes are being built and how many people are doing renovations and remodels,” Webb said.
While it is not yet known what QXO will be bought for, it is clear that Jacobs plans to play a major role in the company’s growth plans as it aims to surpass the $50 billion annual revenue threshold. If Jacobs succeeds in his merger game, he could reshape the fragmented building materials industry and gain bargaining power.
