Inside a 30 year old ERP growing 30%, running on 30% margins - and owned by Constellation Software of course

Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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What sort of businesses does Constellation Software (CSU) acquire to justify its sky-high valuation (a forward P/E of almost 40x)? 

Mature, ultra-niche champions primed for value extraction through price increases, back-to-base licence sales and professional services optimisations. 

Or large-cap ($100M+ revenue), special situations - such as carve-outs and take-privates that others cannot touch? Firms like Crealogix and Optimal Blue, which we covered here.

The answer is both. But that’s only part of the story. 

While CSU’s consolidated organic growth has been anaemic at best, hidden within its portfolio are numerous businesses that are growing very fast, while producing mouth-watering cash returns. 

We are talking about 3x topline growth in 5 years, with a 49% ROIC.   

Today we will take you through the remarkable journey of Akuiteo: “A professional ERP solution designed for services companies of 30 to +5,000 coworkers”.

Akuiteo is based in Lyon, France and has been owned by Volaris, a CSU vertical, since 2019. 

Akuiteo’s product is sought after by professional services firms, especially Tier 2 accounting firms like Mazars and BDO.

How’s it going so far?

In 5 years under new ownership, Akuiteo tripled revenue and grew profits seven-fold. All-in, Volaris paid €7M (€5M upfront) for a business that, by 2024, was pumping out an estimated €4.5M in EBITDA! 

Now, don’t mistake Akuiteo for a hypergrowth story. 

There are only so many Tier 2 accountancies in France, and onboarding each one is a back-breaking exercise. In hindsight, Akuiteo’s journey from €5M to €15M in revenue seems almost logical. Growth beyond that is going to be much more challenging. However, with an estimated ROIC of 50%, we bet CSU is pretty happy! 

This story has everything you need to know to understand how CSU keeps compounding value through M&A - at a micro level:

1. How Akuiteo almost died, twice

2. The breakthrough, hitting $5M revenue - and getting acquired by CSU

3. Breaking down the CSU / Akuiteo deal math 

4. How CSU grew Akuiteo’s revenue 3x and profits 7x - in just 5 years

5. Lessons learnt 

The article is based in part on French public filings, and in part on the excellent podcast from 2023 (in French), on which the Akuiteo CEO Jean-Christophe Llinas told the story. 

1. How Akuiteo almost died, twice

Let’s go back to the early 1990s France. François Petit, then a graduate of the French business school ESCP, founded ITN Consultant: a specialist software vendor to the insurance and mutual fund industries. ITN’s product suite  featured niche applications like ELYXO - a tool for managing personal injury claims. 

In time, ITN had developed internal tools to manage its sprawling operation, such as V9 Gestion (which means “management” in French). In 1995, ITN hired Jean-Christophe Llinas (pictured below) as a junior programmer. V9 Gestion immediately caught Jean-Christophe’s attention as a promising but imperfect piece of code. He took 3 years to rewrite it.

The code rewrite made it possible to market V9 Gestion externally. It was a slow grind. By 2008 - 13 years after being founded - V9 Gestion had finally hit the €1M revenue mark. As such, it was a minnow almost invisible within ITN’s sprawling operation: €11M revenues, 104 employees, and >40,000 end-user workstations. 

To make matters worse, V9’s solution was rapidly growing obsolete, having missed out on the rise of web applications. It was bleeding business to nimbler competitors like Absilis (later Everwin - eventually acquired by Constellation). Jean-Christophe got lucky: ITN landed a jumbo contract with the bank-assurance arm of Caisse d'Épargne, a French banking group. Now, he had the resources to hire a Java developer to do a second complete code rewrite. The Caisse d'Épargne testimonials convinced more insurers to jump onboard - and, thus, fund the rewrite. 

By 2011, the rewrite was 90% complete, V9 was growing…and boom! ITN got sold to Accenture. Jean-Christophe - who held a small stake in ITN - was deeply ambivalent about the transaction. He suspected that, under new ownership, the nascent product would be canned. 

So he offered to spin out V9 Gestion. The shareholders agreed, and Jean-Christophe ended up with a 20% stake in the business - rebranded to Akuiteo. 

That decision proved prescient. 

Within 18 months of the spinout, Akuiteo passed the €1M revenue mark, prompting Jean-Christophe to tender for the remaining stake. The deal, which concluded in 2014, was financed by two French banks - including Akuiteo’s client Caisse d'Épargne. 

This is where things began to get exciting for Akuiteo and Jean-Christophe - after two decades of slog.  

2. The breakthrough, hitting $5M in revenue - and getting acquired by CSU

In 2015 - one year after the buyout - Akuiteo finally hit the jackpot. It landed Mazars France as a client. The contract was as lucrative as it was back-breaking. The implementation phase lasted 3 (!) years, spanning 40 legal entities. Akuiteo’s revenue blew past €5M, with an estimated 20% of that coming from Mazars alone. For context, in 2024, Mazars France reported revenue of almost €600M (source).  

By 2018, Akuiteo had morphed into the archetypal lifestyle VMS: niche, profitable (13% EBITDA margin) - but, in the grand scheme of things, rather small. On a trip to California for the SaaStr conference, Jean-Christophe came face to face with the tremendous scale of American SaaS players. Upon returning to France, he told his team that, in order to survive, Akuiteo had two choices. To raise significant capital, or to join a larger entity. He opted for the latter, selling 100% to Volaris in the summer of 2019. 

Within Volaris, the acquisition was controversial, borderline iconoclastic. On the one hand, Akuiteo’s solution was genuinely mission-critical. On the other, the product was viewed as horizontal rather than vertical (= less defensive). And then there was the issue of client concentration.  

Still, the price felt right, and as we know, CSU folks are highly motivated to do value-accretive deals. 

3. Breaking down the CSU / Akuiteo deal math

In 2018, Akuiteo generated €5M revenue and €0.7M EBITDA. Against that, Volaris offered €4.8M upfront plus a 3-year earnout based on revenue growth and EBITDA. 

1x revenue / 7x EBITDA for the upfront piece makes sense. How was the earnout structured? 

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