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Boss Your Comps pt.2: Who are Europe’s listed software consolidators?
Pavel Prokofiev
June 20, 2023
European listed consolidators: few and cheap!
North America, particularly Canada, is home to the world’s largest listed software consolidators, including well-known names like Constellation, Kinaxis, Enghouse, Opentext, Descartes, and Tyler Technologies. Cross the Atlantic, and the landscape is quite different, with a gaggle of smaller (and cheaper!) companies often misunderstood as conglomerates. Despite this perception, these businesses are proficient in M&A and boast impressive track records.
In this article, we delve into 8 notable European software / internet consolidators: Vitec (Sweden), Topicus (Netherlands/Canada), MEDIQON Group/CHAPTERS GROUP (Germany), Sygnity (Poland), Asseco Group (Poland), Software Circle (UK), Tracsis (UK) and Team Internet (UK).
Disclaimer: as of the date of publication, RollUpEurope has no financial interest in the mentioned securities.
Sweden, ticker STO:VIT-B
Originally a university spinout from northern Sweden, over its nearly 40 year history Vitec has become one of Europe’s leading vertical software consolidators. Today, it has 36 operating units, including 5 acquisitions last year. Vitec primarily focuses on the Nordic region, which accounts for over 80% of its revenue of ~$180M. Its key segments include Enova (energy management solutions) and ABS Laundry Business Solutions.
Vitec’s acquisition criteria include:
Target must offer software in the form of standardized niche developed products aimed at a particular vertical market
Acquisition must directly contribute to an increase in Vitec’s EPS
Target must demonstrate solid profitability and positive cash flows
Vitec also invests in Nordic software companies through its “sidecar” called Malmkroppen.
Netherlands / Canada, ticker CVE:TOI
Topicus was spun out of Constellation Software (CSI) in 2021. Its business model aligns with CSI’s approach of acquiring and managing vertical market software businesses but focuses on Europe. One view is that CSI pursued the spin-out in order to achieve targeted hurdle rates on larger deals and to incentivize management of the newly spun-out entity.
With ~$1B revenue and a 30+ year history, Topicus is a market leader in areas such as mortgage advisor software, pupil tracking software, and practice management software. Topic does not shy away from acquiring multiple businesses in the same industry, allowing them to compete.
Germany, ticker ETR:MCE
MEDIQON traces its origins back to 1998 when its predecessor company, Medical Columbus AG, was established to optimize procurement processes for hospitals. In 2016, new owners, including current CEO Jan-Hendrik Mohr, took over, leading to the divestment of Columbus’ legacy assets to GHX.
The proceeds fueled an impressive acquisition spree, with €100M invested in 26 acquisitions. In 2022, the company reported €67M consolidated revenue and €17M adjusted EBITDA. MEDIQON’s HoldCo retains an 80% stake in its three platforms (Nachfolgekapital, Ookam, and Carma), with the rest held by the management – in line with its decentralized ethos. Historically focused on the German speaking part of Europe, the company is now expanding across the continent.
UK, ticker LON:TRCS
Founded in 2014, Tracsis is a leading provider of software, hardware, data analytics/GIS and services for the rail, traffic data and wider transport industries. The company boasts over 550 employees across the UK, Ireland and in the US. Of the company’s ~$85M revenue, ~40% is generated from railway software.
The company actively pursues M&A opportunities to expand its addressable markets and increase technical capabilities. Tracsis’s acquisition criteria include:
Ability to leverage new sales. Previous businesses have all had good up-sell/cross-sell potential
Great management team. Personal chemistry is important and given that many company founders wish to stay on post-acquisition in some capacity, the ability to work together is critical
History of profitability & recurring revenue. Tracsis is most interested in businesses that have shown consistent strong financial performance rather than meteoric growth
Niche & defensible proposition – having a unique offering with high barriers to entry
Tracsis seeks to partner with established, profitable, like-minded businesses. It does not take minority positions in businesses or enter into joint ventures.
Poland, ticker WSE: SGN
Established over 30 years ago, Sygnity is a well-established vertical market software solution provider in Poland, focusing on banking, finance and insurance, energy, utilities, industry, local and central administration. Sygnity offers dedicated solutions to each of its markets; all focused on automating mission-critical processes of the target audience. With ~$52M in revenues and ~$9M in EBITDA, Sygnity has over 900 employees.
In May 2022, a controlling stake in Sygnity was purchased by TSS/Topicus. Despite this transaction, the company continues to trade on a Warsaw Stock exchange, albeit with a small trading volume.
Similar to Topicus, Sygnity is focused on acquiring mission-critical VMS assets, primarily in Poland.
Poland, ticker WSE: ACP
Founded in 1991, Asseco Group is a federation of companies engaged in information technology and operates in 60 countries worldwide. Shares of the Asseco Group companies are listed on three stock markets (Poland, Israel and the US). With ~$4BN in revenues and ~$470M in EBITDA, Asseco has over 33,000 employees.
From an acquisition standpoint, the cornerstone of Asseco model is a so-called Federation. Within Federation, Asseco allows the companies to freely operate as they did before the acquisition. At the same time, Asseco gives them the edge of being a part of a wealthy, multinational firm, increasing their reliability and market position.
In its acquisition activities, Asseco focuses primarily on increasing its competence in core business sectors (i.e., banks, energy and telecommunication companies, the public sector and the health care service), entering new geographical markets or reinforcing the Asseco’s position in the countries where it has been already present.
Other acquisition criteria include:
Profitability. Asseco are looking for profitable companies or those on the verge of breaking even.
Software/IP. Focus is buying on companies that own software IP and generate recurring revenues.
Size. No specific size criteria.
UK, ticker LON: GRA
Founded in 2000, SC today is a serial acquirer of great vertical market software businesses. Interestingly, it was not always the case, as the origins of the business were in the printing industry (you may remember their most famous brand, printing.com). As the industry changed, the then Grafenia adapted by launching new brands and software platforms over the years, to adapt to what clients want – one of those was Nettl, which is now the UK’s largest network of neighbourhood web, print, sign and design studios. In around 2020, the company rebranded its website to position itself as the serial acquirer.
Software Circle’s acquisition criteria include:
Companies that operate a niche B2B software business with an established client base
With annual revenues above £500k.
Low Churn Rate, ideally below 10%.
Over than 30 Customers.
Based in UK or Ireland.
Are profitable.
UK, ticker LON:CNIC
Listed on London’s junior AIM market in 2013, Team Internet is an internet services company generating ~$730M in 2022 gross revenue (~$180M net revenue). It operates in two divisions: Online Marketing (constituting around 80% of revenue) and Online Presence (around 20%). The Online Marketing division drives online traffic from social media to advertisers, while the Online Presence division resells domain names and offers online brand protection.
Team Internet is an example of a successful strategy pivot, as most of the businesses constituting the Online Marketing vertical were acquired in the last 4 years, including VGL and Codewise.