I caught up again with John Billowits, CFO of Toronto-based software aggregator, Constellation Software, and I have to say, the more I learn about the company, the more I become intrigued!
Avid UKHotViews readers will recall that Constellation was the eventual winner of the ‘Gladstone Stakes’ (see Constellation to round up stray Gladstone mounts and work back), and had also accumulated holdings in AIM-listed HR software company, Bond International (see Bond acquires VCG as Constellation ups stake) and the somewhat troubled (and also AIM-listed) public sector document management player IDOX (see Constellation bid for IDOX more likely?) – though it no longer has a stake in the latter.
But what readers may not know is that Constellation has another half-dozen or so (previously) privately-held UK software companies under its belt - and is on the prowl for more. Indeed Constellation is the archetypal ‘buy and build’ aggregation vehicle (note – I do not use the term ‘consolidator’ as it rarely integrates its acquisitions). Constellation buys and, to all intents and purposes, never sells. In other words, it plays like a private equity firm – but without the ‘flip’.
Constellation’s sweet spot is around small – and not necessarily perfectly formed – vertical software companies, usually not (yes, not) playing in ‘hot’ themes. They want the reliable – dare we say ‘boring’ - earners! Then they grow them. And if you think that’s ‘boring’ – just take a look at the share price performance of Constellation’s (albeit tightly held) stock over the past few years! I have little doubt we will be hearing more from Constellation in due course.