Clarify M&A strategy with the "Four T’s": Talent (acqui-hires), Tech (IP acceleration), Traction (customers/revenue), and Terrain (long-term bets). Each has different diligence needs and success metrics, and companies should build M&A muscle by mastering them in that order.

Instead of relying on VC funding, Lemlist operates a self-sustaining growth model. By maintaining a high EBITDA margin (always above 20%), the company generates significant positive cash flow, which it then strategically deploys to acquire companies like Clapp as a form of reinvestment.

Acquiring smaller companies at a 5-6x EBITDA multiple and integrating them to reach a larger scale allows you to sell the combined entity at a 10-12x multiple. This multiple expansion is a powerful, often overlooked financial driver of M&A strategies, creating value almost overnight.

The current M&A landscape is defined by a valuation disparity where smaller companies trade at a discount to larger ones. This creates a clear strategic incentive for large corporations to drive growth by acquiring smaller, more affordable competitors.

Recent acquisitions of slow-growth public SaaS companies are not just value grabs but turnaround plays. Acquirers believe these companies' distribution can be revitalized by injecting AI-native products, creating a path back to high growth and higher multiples.

The acquisition of Clapp wasn't driven by market analysis but by the Lemlist team becoming passionate users first. The CEO fell in love with the product, leading to company-wide adoption. This bottom-up conviction in the product's quality was the starting point for the M&A conversation.

To minimize upfront cash, Lemlist structured the deal with only $5M cash, a $5M 'vendor loan' (the seller finances part of their own sale), convertible bonds for founder alignment, and a $15M performance earn-out tied to growing revenue from $2M to $10M ARR in three years.

The Clapp acquisition began when Lemlist's CEO sent a random cold email to the founder. Despite competing against larger companies who bid more, Lemlist won the deal by focusing on product synergies and team fit, proving that a strong relationship and shared vision can be more valuable than the highest offer.

To incentivize Clapp's founders, part of the deal included convertible bonds in Lemlist's parent company. This structure avoids the complex process of setting a formal valuation for Lemlist today, instead granting the founders the right to buy shares at a 20-30% discount during a future liquidity event.