Hertz’s CEO was angry about falling behind to United Rentals.
“You made me change one of my tag lines. I had the largest car rental company and the largest equipment rental company in the world. And now I’ve got the largest car rental company, and the second largest equipment rental company. I don’t want to be second in anything.”
He scolded Brad, “You’re making a mess of it. You’ll screw up the whole industry and go bankrupt!”
Brad responded, “Look, you’re smart. And I respect that you know the industry, but United Rentals isn’t going bankrupt. We have a winning plan here. And I don’t have a dominant share of the market. No one does. So go out there and beat me. Win your tag line back.”
Hertz never beat United Rentals after that.
Last week on Methods of Prosperity
Brad Jacobs was born on August 3, 1956, in Providence, Rhode Island. He showed early promise in art and music, attending a special program for gifted students. He received scholarships from Northfield Mount Hermon Boarding School and Bennington College. He dropped out of Brown University.
Jacobs co-founded Amerex Oil Associates in 1979. Amerex grew into a major oil brokerage firm under his leadership. They developed revolutionary data-sharing technology to gain a competitive edge. After selling Amerex in 1983, Jacobs founded Hamilton Resources Ltd. He pioneered leveraging information sharing in the oil industry. Hamilton Resources Ltd. grew to $1 billion in revenue.
In 1989, Jacobs shifted to waste management, founding United Waste Systems. He used technology to improve efficiency and profits. The company sold for $2.5 billion in 1997. He then targeted the construction equipment rental industry, founding United Rentals. He used data science for dynamic pricing and equipment use. United Rentals surpassed Hertz Equipment Rental in revenue.
The following is Methods of Prosperity newsletter number 61. It was originally deployed August 15, 2024. As of April 24, 2025, original subscribers have received up to Methods of Prosperity newsletter number no. 97: Larry Gagosian.
Disclaimer: the author is not a financial adviser. NFA. DYOR.
Part 61.
Key Lessons:
Automate as much as possible.
Expect positive outcomes.
Find and fix inefficiencies.
Be better not only bigger.
Prioritize technology.
Get the culture right.
Embrace problems.
Invest in A players.
Go after big deals.
Meditate.
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In 2007, Jacobs sold United Rentals to Cerberus Capital Management LP. The private equity firm did this through its subsidiaries. RAM Holdings and RAM Acquisition Corp paid $7 billion. This included their assumption of $2.6 billion of debt. He stepped down as chairman.
That’s when the sub prime mortgage crisis hit. On November 14, 2007, Cerberus defaulted, backing out of the deal. United Rentals stock plunged 31 percent in 24 hours. Over the course of the following year, stock fell to $5. United Rentals filed a lawsuit to enforce the merger agreement. Cerberus also filed a suit to limit its liability to a $100 million breakup fee. United Rentals didn’t seek another buyer. Today, United Rentals (URI) is trading at over $700 per share.
In 2010, he established Jacobs Private Equity LLC. Then, in 2011, he repeated the same roll up strategy as with the previous industries. This time he chose the truck brokerage sector. He noticed that this was an opportunity to take advantage of another big trend. His oil brokerage had a similar business model. Truck brokers match industry carriers to shippers. Brokers in the position to have a direct connection to the entire freight landscape. This is on both sides of the equation. For the most part, shippers who use an in house department to source trucks have limited capacity. While small carriers don’t have the market facing resources to reach out to a large number of shippers. An efficient truck broker will get their load to its destination with few empty miles. What’s more, they will be more efficient with fuel and costs than an inefficient truck broker. Most truck brokers in 2011 were inefficient. They operated over the phone instead of using digital technology.
Brad Jacobs founded XPO Logistics in 2011. He turned it into one of the world’s leading transportation and logistics providers. He did this through strategic acquisitions and expansion. He used scale, data science, and automation. He prioritized technology investments. XPO’s tech team created an automated digital transportation network. It spans a nation wide virtual freight market place. It provides a single repository of information. It facilitates private transactions in the cloud. Huge amounts of data flow into the platform in real time. This system is in use today as RXO Connect in North America, and XPO Connect in Europe. RXO Inc. and GXO Logistics, Inc. are spin-off companies from XPO. He currently serves as the executive chairman of XPO, Inc. and holds non-executive chairman positions at RXO Inc. and GXO Logistics, Inc.
Brad only does deals where the downside scenario is still good for the company. Think of it like a game of heads or tails. Heads you win, tails you don’t lose much. Brad’s basic rationale for any M&A deal is the following question. How will doing this deal contribute to the two main drivers of shareholder value? Which are pleasing customers and propelling financial results.
He asks, “How will doing this deal convince more customers to wire money from their bank account to ours?”
In conclusion, your M&A deals need to make your company better, not bigger. A good M&A deal needs to drive stock holder appreciation over the next five to ten years. Cash flow projections need to be higher than at the time of acquisition. There needs to be a clear path to significant growth. Due diligence needs to be efficient. Weeks instead of months is best. The deals you avoid may contribute to your success more than the deals you’ve done. No deal is better than a bad deal.
Also, understand that a seller is usually under pressure. It may be a distressed business, or a life cycle change like divorce. Don’t kill the deal out of personality conflicts or lack of empathy. Get the culture right. It can be a challenge to make sure integration is smooth. Company cultures can be different yet compatible. It doesn’t work if your values are not in alignment. Brad meets face to face with the top fifteen people in the company he acquires.
Operational integration needs to be efficient. That requires a seamless integration into the technology stack. There needs to be one enterprise platform, one human resources system, one CRM. One business intelligence database, one internal social media community, one KPI dashboard. There needs to be one training curriculum, and one email system. Branding, marketing and services are a part of this process.
There’s a lot more to his strategy of M&A, roll-ups, and arbitrage. Capital allocation, recognizing trends, hiring excellent teams, tying compensation to results. He’s known for his entrepreneurial spirit and strategic acumen. Jacobs has completed over 500 merger and acquisition deals throughout his career. Imagine the challenge of creating one billion dollar business. Brad has created seven, so far.
The last thing to mention is the first thing Brad talks about in his book, How to Make a Few Billion Dollars.
That is mindset. He goes beyond what most executives emphasize.
“If you want to make a few billion dollars, you’ll need to think differently and expansively.”
Conventional thinking often fails. He recommends mind exercises, elaborate meditations, which he refers to as thought experiments. Retraining your brain is the psychological key to your success. You can start to perceive information from unusual perspectives. This allows you create expansive experiences. It’s more than optimism. We must recognize realistic pessimism. He calls it dialectical thinking. Expect positive outcomes. Refute negative automatic thoughts. They are cognitive distortions. Don’t let your intrusive thoughts win. Understand that perfection doesn’t exist.
Embrace the problem. The reality is that solving problems is your job. Each problem is an opportunity to remove an obstacle and get closer to success. Problems are not something to avoid, but something to run toward. Problems are the byproduct of risk. The bigger the problem, the greater the value you can create for others. Recognize mistakes and course correct. Find the inefficiencies at the core of the problem. Find ways for your team to reduce operational defects. Make sure you have the right people in key positions. Many problems are self inflicted.
I like you,
– Sean Allen Fenn
PS: You don’t have to follow me on 𝕏, but you can partner with me to bring about serious advancement for each other.
Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/FAQ
Do you know about my livestream podcast? It’s called Hidden Secrets Revealed Live (HSRL), and I record it live on 𝕏 every Wednesday.
Sean Allen Fenn
