Earlier this year Constellation announced changes in capital allocation plans in 2021 that open the door for us to engage in much larger deals than we have conventionally been a part of. We have done exceptionally well investing in small-to-midsize VMS (“Vertical Market Software”) companies. With acquisitive growth central to our investment strategy, CSI is now looking to pursue more large (multi-hundred million dollar) VMS acquisitions.

Having historically paid special dividends to shareholders with excess free cash flow available to shareholders (“FCFA2S”), the board has decided to reallocate and deploy that capital to pursue very large VMS acquisitions. With a dedicated team in place and considerations to lower hurdle rates for these acquisitions, we look forward to working with M&A brokers and participating in these auctions.

“Most of our competitors maximize financial leverage and flip their acquisitions within 3-7 years. CSI appreciates the nuances of the VMS sector. We allow tremendous autonomy to our business unit managers. We are permanent and supportive stakeholders in the businesses that we control, even if their ultimate objective is to eventually be a publicly listed company. CSI’s unique philosophy will not appeal to all sellers and management teams, but we hope it will resonate with some.” – Mark Leonard, President of Constellation Software Inc.

We will maintain our traditional hurdle rates for small and mid-sized VMS acquisitions and will continue to invest most FCFA2S as we always have.

“Our Operating Group Managers have done a spectacular job of growing CSI’s market share of acquisitions within this portion of the VMS sector, without succumbing to the siren song of increased centralization, bureaucracy, and control. Most of these businesses are blessed with big moats and long-tenured employees and customers. The Operating Groups provide a low overhead environment where autonomy, collegiality, and shared knowledge are the cultural norm, and good people thrive. I am incredibly proud of what they have accomplished.”  – Mark Leonard, President of Constellation Software Inc.

This is an exciting time for Constellation, as we continue to grow and invest in software companies globally. We look forward to expanding our presence and activity in these markets in new ways.

Feel free to reach out to us directly if you have questions about what I’ve mentioned above or would like to discuss opportunities.


Tom George
President and Managing Partner
Constellation Real Estate Group
M: 310-734-0940