Betting on Yourself: Jude David on Knowing Your Value in M&A Deals

Joshua Wilson: Man, this is a life lesson that, that I'm learning is one is know your value, right? So you went from hourly to betting on yourself. You're like, okay, I'm gonna get more into, you know, m and a advisory and investment banking.

You took a risk of going, I know one plus one equals, two, when you're doing your, your hourly rate, you know, if butts in seat, you can bill and you can make that going to something where there's uncertainty if you don't bring home a deal. You don't eat right? So there's betting on yourself and knowing, knowing your value of what you could bring to the deal table there I think is really important.

But you also mentioned knowing your value in terms of your own organization. This company might be selling at a two X, right? But to you it might be worth a five x. So there's automatic value built into that. How do you know essentially what you're worth and what that company may be worth to you if you acquire that?

Jude: That's a great question. So. A lot of deal experience to understand it. Somebody just starting out at it, it's about deal comps. You know, you have to be able to go look at the different industries. What do different industries trade for? And then, you know, the different sizes of company within that industry.

So, let's say you find a manufacturing business you like manufacturing businesses on the small end might trade for two to three times. Ebitda. You get to a mid-market manufacturing business, it might be six to seven times ebitda, and you get to a mega manufacturing business, maybe it's north of 10 times ebitda.

And so once you understand the sector that you're in and then the comparable transactions within that sector, you can understand what things are worth. So for us. When we first started out, if we acquired a business for three times, it's probably because it was worth three times. Whenever we'd acquired enough businesses and bundled them together and really created something cohesive out of them, and we're a bigger fish, well now we trade at six or seven times.

Well, that's fantastic because if I go out and I buy. A company at three times that I can bolt into what we're already doing and make it a part of our organization, assuming we can keep that EBITDA alive, that, that those net earnings alive, those, we paid three times for 'em, but now they're worth six or seven times in our hands.

Uh, so that's the easiest version of it. You know, it's the arbitrage that instantly happens in the deal, assuming you can pull them into the fold and make them a part of your company. ​