The patient capital writing big checks into software HoldCos

With so much technology HoldCo activity lately, we update our analysis regularly. That way, it will never grow stale. 

Last week, we discussed the 6 ways in which serial acquirers have raised equity. Today, we are bringing you a run-down on the 70+ investors who have backed software serial acquirers of all shapes and sizes. PE and VC firms. University endowments. Permanent equity. Single and multi-family offices. Simply rich people. 

Are you in a rush and tempted to skip the writeup and get to the investor list? Go ahead and click through to the serial acquirer database: a comprehensive repository of 230+ companies and their equity and debt backers. It is included within the annual subscription. 

The OGs of software rollups

You cannot claim to be a software HoldCo cognoscento if you haven’t penned a blog article on Constellation Software. Established in 1995 by the legendary Canadian investor Mark Leonard, this c.C$80B (c.US$60B) market cap firm has perfected the art of acquiring vertical market software (VMS) businesses. 

With over 600 acquisitions under its belt, Constellation operates like a well-oiled machine. But here's the twist: rather than being subjected to central supervision, each acquired business is managed independently within distinct operating groups. Names like Volaris, Harris, Jonas, and TSS command their own territories in this sprawling empire (full disclosure: Pavel earned his stripes at Volaris). 

With a eye for bargains - and annual M&A budget of $1-2B, Constellation has seen its share price surge more than 200x since the 2006 IPO. The stock is up more than 40% in the last twelve months alone. 

Why? Because after almost 30 years, Constellation still churns out double-digit growth fuelled by M&A. Its Q1 2024 revenues were up 23% YoY (reaching $10B+ on a run-rate basis) and operating cash flow was up 16% YoY. 

For an in-depth dive into Constellation's empire, check out Colin Keeley's insightful write-up on Mark Leonard's operating manual as well as our own writeup on its capital deployment.

Like any successful business, Constellation has bred both spinoffs (Lumine and TSS are both listed) and “alumni” vehicles, like Arcadea Group (led by Daniel Eisen and Paul Yancich; link to our primer) and PineTree (led by Mark Leonard’s son Damien). 

Across the Atlantic, Constellation finds a worthy European counterpart in Visma. Founded in Norway in 1996, Visma boasts backing from heavyweights like Hg Capital (its majority investor for nearly 20 years!), GIC, TPG, ICG, General Atlantic and others. Visma’s Q1 2024 ARR of $2.6B was up 18% YoY.  

Fun fact: Visma's origins can be traced back to Spectec, a software provider for the global marine industry. In a serendipitous turn, Spectec joined forces with Volaris in 2012 to establish its Marine Division, completing a full circle of evolution.

Further reading: Zak Fuss from the Business Breakdowns podcast broke down Visma’s story with Nic Humphries, a senior partner at Hg.

The seeds sown by Mark Leonard nearly three decades ago have blossomed into an industry of immense proportions, with numerous consolidators vying for dominance. In the following profiles, we shed light on some of the notable players in this ever-expanding landscape.

The primer

In the table below, we have categorised software serial acquirer investors into four buckets:

1. Private equity “captive aggregators”

2. Growth equity and venture capital into sector plays

3. Institutional “permanent equity”

4. Wealthy individuals and family offices that invest directly

Of course, the classification is somewhat arbitrary given the time required to build up the scale and the credibility for any platform. 

Category #1: 𝗣𝗘 (semi-)"𝗰𝗮𝗽𝘁𝗶𝘃𝗲 𝗮𝗴𝗴𝗿𝗲𝗴𝗮𝘁𝗼𝗿𝘀"

Here we find software aggregators that have been either founded or acquired by private equity. 

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