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.
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.
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.
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.
Lemlist's M&A thesis focuses on acquiring companies like Clapp, which had a superior product built by just seven people but lacked market reach. They believe Clapp is a '$20M ARR product' trapped at $2M ARR, creating an opportunity to plug strong tech into their own powerful distribution engine for rapid growth.
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.