Constellation Software

Business

The company's business strategy is to acquire software companies, and then hold them for the long term. It has acquired over 500 businesses since being founded. It focuses on vertical market software companies (i.e. those that create software for a particular industry or market, as opposed to creating software usable for a wide variety of markets). Most of its acquisitions are relatively small (for less than $5 million), although the company has indicated that it may pursue larger acquisitions in the future. For instance, Constellation acquired Acceo Solutions for $250 million in January 2018, its then second-largest acquisition. In March 2022, Constellation Software acquired Allscripts’ hospital business unit for $700m. As per the agreement, Allscripts will receive a fixed amount of $670m plus $30M as a performance bonus at the closing of the deal. Although the company has experienced great success with this strategy in the past (its stock has increased 30 times since its IPO in 2006), it has experienced more competition in acquiring companies in recent years, especially from private equity and hedge funds. As of 2016, 67% of revenue was from customers in the public sector, while the other 33% was from customers in the private sector. 12% of revenue was from Canada, 52% from the US, 30% from Europe, and 5% from the rest of the world.

Operating segments

Constellation Software has seven operating segments:

Volaris Group: focuses on acquiring software businesses serving various areas, including agri-business, financial services, and education. It has more than 150 constituent software businesses.

Harris Computer Systems: primarily serves the public sector, including utilities, education, and healthcare, as well as the private technology, retail technologies, payment solutions and insurance sectors. It has over 100 constituent software businesses.

Controversy

In 2016, the founder of Innoprise Software sued Harris Computer Systems for giving away its software for free, thus reducing the value of a revenue-sharing agreement.

In mid-2018, the company cancelled its quarterly earnings calls, a highly unusual step for a public company. Analysts suggest the company took this step because it was worried about leaking information about potential acquisitions to its competitors.