![Constellation Software is one of the world’s greatest acquirers and operators of SaaS Businesses. It’s an incredible compounder and like Amazon and Berkshire Hathaway, Mark Leonard’s shareholder letters are a work of art.<br /><br />We discuss the company’s enigmatic founder, why its compensation scheme is the gold standard, and how it has built an acquisition engine that allows it to buy dozens of companies each year.<br /><br />To breakdown Constellation, I'm joined by Chris Cerrone, a partner and portfolio manager at Akre Capital Management.<br /> <br /> For the full show notes, transcript, and links to the best content to learn more, check out the episode page here: https://www.joincolossus.com/episodes/23981128/cerrone-constellation-software-principled-profitable-and-permanent<br /> <br /> -----<br /> <br /> This episode is brought to you by Tegus, the modern research platform for leading investors. I’m a longtime user and advocate of Tegus, a company that I’ve been so consistently impressed with that last fall my firm, Positive Sum, invested $20M to support Tegus’ mission to expand its product ecosystem. Whether it’s quantitative analysis, company disclosures, management presentations, earnings calls - Tegus has tools for every step of your investment research. They even have over 4000 fully driveable financial models. Tegus’ maniacal focus on quality, as well as its depth, breadth and recency of content makes it the one-stop, end-to-end research platform for investors. Move faster, gather deep research to build conviction and surface high-quality, alpha-driving insights to find your differentiated edge with Tegus. As a listener, you can take the Tegus platform for a free test drive by visiting tegus.co/patrick.<br /> <br /> -----<br /> <br /> Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.<br /> <br /> Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.<br /> <br /> Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt | @domcooke<br /> <br /> Show Notes<br /> [00:00:00] - Introduction<br /> [00:02:37] - [First question] - How Chris and Akre came across Constellation Software <br /> [00:05:21] - An overview of Constellation<br /> [00:08:40] - The origins of Constellations’ 30-year legacy of extraordinary returns<br /> [00:11:57] - A deeper explanation of vertical market software as it relates to Constellation<br /> [00:15:30] - The impressive scale of Constellation despite its niche-targeted portfolio<br /> [00:18:04] - Their incentive structures and their avoidance of stock-based compensation<br /> [00:21:05] - Additional ways in which Constellation stands out, relating to the Rule of 40 <br /> [00:23:20] - The barriers that keep competitors and copycats from overtaking them<br /> [00:28:00] - The three legs of Constellation’s acquisition engine<br /> [00:32:57] - Recent spin-offs of assets as opposed to straight acquisitions<br /> [00:35:45] - How Constellation is planning for the future<br /> [00:38:13] - Why they’re considering expansion toward non-VMS acquisitions<br /> [00:40:30] - Capital allocation and Mark Leonard’s outlook more broadly<br /> [00:43:46] - How the business reflects Mark’s nature and values<br /> [00:47:31] - How much technology risk does the business face?<br /> [00:50:56] - Is organic growth a concern? <br /> [00:57:40] - Lessons for operators when studying Constellation’s story<br /><br />#businessbreakdowns #constellationsoftware](https://media.thebusinessprofessor.com/wp-content/plugins/youtube-feed-pro/img/placeholder.png)
Constellation Software is one of the world’s greatest acquirers and operators of SaaS Businesses. It’s an incredible compounder and like Amazon and Berkshire Hathaway, Mark Leonard’s shareholder letters are a work of art.
We discuss the company’s enigmatic founder, why its compensation scheme is the gold standard, and how it has built an acquisition engine that allows it to buy dozens of companies each year.
To breakdown Constellation, I’m joined by Chris Cerrone, a partner and portfolio manager at Akre Capital Management.
For the full show notes, transcript, and links to the best content to learn more, check out the episode page here: https://www.joincolossus.com/episodes/23981128/cerrone-constellation-software-principled-profitable-and-permanent
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This episode is brought to you by Tegus, the modern research platform for leading investors. I’m a longtime user and advocate of Tegus, a company that I’ve been so consistently impressed with that last fall my firm, Positive Sum, invested $20M to support Tegus’ mission to expand its product ecosystem. Whether it’s quantitative analysis, company disclosures, management presentations, earnings calls – Tegus has tools for every step of your investment research. They even have over 4000 fully driveable financial models. Tegus’ maniacal focus on quality, as well as its depth, breadth and recency of content makes it the one-stop, end-to-end research platform for investors. Move faster, gather deep research to build conviction and surface high-quality, alpha-driving insights to find your differentiated edge with Tegus. As a listener, you can take the Tegus platform for a free test drive by visiting tegus.co/patrick.
—–
Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.
Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.
Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt | @domcooke
Show Notes
[00:00:00] – Introduction
[00:02:37] – [First question] – How Chris and Akre came across Constellation Software
[00:05:21] – An overview of Constellation
[00:08:40] – The origins of Constellations’ 30-year legacy of extraordinary returns
[00:11:57] – A deeper explanation of vertical market software as it relates to Constellation
[00:15:30] – The impressive scale of Constellation despite its niche-targeted portfolio
[00:18:04] – Their incentive structures and their avoidance of stock-based compensation
[00:21:05] – Additional ways in which Constellation stands out, relating to the Rule of 40
[00:23:20] – The barriers that keep competitors and copycats from overtaking them
[00:28:00] – The three legs of Constellation’s acquisition engine
[00:32:57] – Recent spin-offs of assets as opposed to straight acquisitions
[00:35:45] – How Constellation is planning for the future
[00:38:13] – Why they’re considering expansion toward non-VMS acquisitions
[00:40:30] – Capital allocation and Mark Leonard’s outlook more broadly
[00:43:46] – How the business reflects Mark’s nature and values
[00:47:31] – How much technology risk does the business face?
[00:50:56] – Is organic growth a concern?
[00:57:40] – Lessons for operators when studying Constellation’s story
#businessbreakdowns #constellationsoftware