Serial acquirer Lifco improves post-acquisition performance by having sellers retain an ownership stake in their business. This goes beyond typical earn-outs, keeping the founder's expertise and incentives aligned with the parent company for long-term growth, rather than just hitting short-term targets.

An earn-out is a tool for alignment, not just a financial hedge. If a target company is on track to miss its earn-out targets, a savvy acquirer will proactively renegotiate the terms. The long-term value of retaining and motivating the key team members outweighs the short-term financial gain of a missed payment.

Alex Bouaziz's core M&A principle, learned from his father, is to optimize for long-term satisfaction over short-term leverage. Even when holding the upper hand in negotiations, he structures deals to be fair for both sides. The goal is for both the acquirer and the acquired founder to look back in five years and feel the deal was a great outcome, ensuring better integration and alignment.

While known for late-stage acquisitions, Mirum strategically uses smaller deals for early-stage assets to expand its capabilities. The Anthoran Therapeutics deal serves as a model: a low upfront payment with a back-ended structure allows Mirum to enter early-phase development—a new area for the company—while managing financial risk.

Go beyond standard performance-based earn-outs by structuring payments with 'kickers' that reward sellers for specific de-risking actions. For example, if there's high customer concentration, offer an additional payment for diversifying revenue away from the main client, aligning them with the buyer's risk mitigation goals.

When acquiring a business, don't rely on a single outcome like achieving a growth target. Instead, seek assets that offer multiple ways to win. Even if the primary goal is missed, the acquired data, technology, or talent could create significant value for other business units, providing built-in insurance for the deal.

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.

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.

Instead of jumping directly to an acquisition, de-risk the process by first establishing a partnership or licensing agreement. This allows you to test the technology, cultural fit, and market reception with a lower commitment, building a stronger foundation for a potential future deal.