Constellation Software Acknowledged as a Key HR Software Provider by APPS RUN THE WORLD in the HCM Top 500 Market Report

1200 - 20 Adelaide Street East

Toronto, ON, M5C 2T6, Canada

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https://www.csisoftware.com/

25 Constellation Software

Constellation Software Strengths, Domain Expertise, and Key Differentiators

Constellation Software (CSI) operates as a conglomerate of acquired software companies specializing in vertical markets. Following acquisitions, CSI adopts a distinctive approach by allowing the day-to-day management of its subsidiaries to remain under the control of existing managers and employees. While providing support in various areas, including values establishment, capital allocation processes, profit-sharing programs, benchmarking, cross-sharing of best practices, formal management training, and ongoing mentoring, CSI functions primarily as a holding company. Recent developments often involve mergers, acquisitions, and occasional divestitures.

Unlike traditional software companies, CSI resembles a private equity firm. While competitors typically maximize financial leverage and aim for acquisitions to be flipped within 3-7 years, CSI takes a long-term approach, becoming a permanent and supportive stakeholder in its controlled businesses. Despite aspiring to eventual public listing, CSI grants significant autonomy to business unit managers. While the financials reflect substantial value for shareholders, the impact on end-users depends on industry nuances and the diverse technologies employed by each subsidiary.

Constellation Software Recent Developments

In a comprehensive communication to its shareholders, CSI's President and Chairman of the Board, Mark Leonard, delineated a strategic paradigm shift for the company's future operational trajectory. Departing from the historical modus operandi of upholding elevated hurdle rates, particularly for small and mid-sized Vertical Market Software (VMS) acquisitions, the company is embarking on a new approach. Henceforth, CSI intends to prioritize the reinvestment of all generated cash, displaying a willingness to recalibrate hurdle rates as necessary.

Traditionally, CSI, recognizing its capability to deploy capital more effectively than a significant majority of its shareholders, has maintained a practice of refraining from extensive investments, leading to surplus free cash flow, which has been returned to shareholders through special dividends over the past decade. The forthcoming strategy entails a shift away from this dividend payout model, with the company committing to invest all generated cash, even if it entails revisiting established hurdle rates.

While the company will persist in its commitment to small and mid-sized VMS acquisitions, it is introducing two pivotal initiatives. Firstly, there will be an expanded pursuit of very large VMS businesses necessitating multi-hundred-million-dollar equity commitments. Secondly, CSI is venturing beyond the confines of the VMS sphere, seeking to develop investment competence in other domains. This diversification effort includes the establishment of a dedicated team at CSI's headquarters, entrusted with the pursuit of substantial VMS acquisitions and collaborative engagements with M&A brokers. This multifaceted approach signals CSI's proactive stance in adapting to evolving market dynamics and seizing new opportunities for growth and value creation.

Constellation Software Mergers and acquisitions (M&A) Activities

In July 2023, Constellation Software, through its Perseus operating group, formalized its commitment to acquire Black Knight’s Optimal Blue business. The acquisition is valued at USD 700 million, comprising a USD 200 million cash payment by Constellation, while the remaining USD 500 million will be financed through a promissory note issued to Black Knight, a subsidiary of Intercontinental Exchange, upon the completion of the transaction.

In February 2023, Constellation Software and its subsidiary Lumine Group have successfully completed the agreement to acquire 100% of the shares of WideOrbit Inc., a media software provider based in the U.S. WideOrbit is now a wholly owned subsidiary of Lumine Group and will function as an autonomous business unit within Lumine Group's portfolio of companies. Furthermore, Lumine Group, following the dividend-in-kind payment from Constellation, has been spun out as an independent public company, operating independently of Constellation.

In May 2022, Constellation Software completed the acquisition of Altera for $727 million. Although Altera is not classified as a reportable operating segment of CSU, its significance as CSU's largest acquisition warrants separate tracking. Notably, Altera's organic revenue growth has presented challenges, contributing to a 13% year-over-year decline in the group's overall performance at constant currency in the current quarter.

In June 2021, CSI strategically expanded its portfolio with the acquisition of Fair Isaac Corporation’s Collection and Recovery business, seamlessly integrating it into Constellations' Jonas Software operating group, reinforcing CSI's commitment to diversifying its offerings.

In February 2021, CSI, through its wholly-owned division Volaris Group, executed a significant acquisition by adding SSP Limited to its fold. SSP Limited, renowned for its technology systems and software tailored for the property and casualty insurance industry, aligns seamlessly with CSI's mission to enhance its technological footprint.

In January 2021 CSI combined an acquisition with a divestiture. Acting through its Total Specific Solutions (“TSS”) operating group and its subsidiary TPCS Holding B.V., CSI completed the purchase of 100% of the shares of Topicus.com B.V. (“Topicus”), a Netherlands-based diversified vertical market software provider. In connection with the closing of the acquisition, TSS has been spun out of Constellation and now operates, together with Topicus, as a separate public company.

Noteworthy is CSI's strategic move in May 2020, wherein Constellation Software entered into a binding agreement to acquire Topicus.com B.V., marking a pivotal step towards consolidation. The subsequent collaboration between Total Specific Solutions and Topicus under the operating group name "Topicus.com" reflects CSI's dedication to fostering synergies and exploring future opportunities, including the potential public listing of Topicus.com's shares.

The acquisition of Topicus was financed through TSS' existing resources and credit line, demonstrating CSI's commitment to prudent financial management. The transaction, involving a cash payment and the issuance of approximately 9% of Topicus.com shares to the Seller, underlines CSI's strategic approach to expansion.

In November 2017, Vela Operating Group, under the umbrella of CSI, augmented its capabilities with the acquisition of Financial Aid Management for Education. This move solidified CSI's presence in providing Financial Aid Solutions and Student Information Systems to Higher Education clients, emphasizing the company's commitment to innovation and client-centric solutions.

Constellation Software Customers in ARTW Customer Database

Leveraging a rigorous data-centric research methodology, APPS RUN THE WORLD asks the simple question: Who’s buying Constellation Software applications and why? And we provide the answers – supported by decades of research – to our clients around the world. Our Customer database has over 100 data fields that detail company usage of Constellation Software and other enterprise apps by function, customer size, industry, location, implementation status, partner involvement, Line of Business Key Stakeholders and IT decision makers contact details. List of Verified Friedman ERP for hosting, customers.

Constellation Software Key Cloud and HCM Applications

Friedman ERP for hosting,

Constellation Software HCM and Cloud HCM Applications Revenues, $M:

Type/Year20222023YoY Growth, %
Total Revenues, $M Subscribe Subscribe Subscribe
HCM Applications Revenues, $M Subscribe Subscribe Subscribe

* HCM Applications Revenues = License + Support & Maintenance + SaaS ( Hardware and Prof. Services are Excluded )
** All revenue figures are estimates based on public records, Cloud and Non-Cloud business models in Apps Run The World's vendor database, and annual survey results including vendor feedback.

Constellation Software Revenue Breakdown by Type:

TypeLicenseServicesHardwareS&MSaaSPaaSIaaSOtherTotal
% of Total Revenues Subscribe Subscribe Subscribe Subscribe Subscribe Subscribe Subscribe Subscribe 100%
Revenues, $M Subscribe Subscribe Subscribe Subscribe Subscribe Subscribe Subscribe Subscribe Subscribe

Constellation Software Total and HCM Applications Revenues by Region:

Region% of Total Revenues2023 Total Revenues, $M2023 HCM Applications Revenues, $M
Americas Subscribe Subscribe Subscribe
EMEA Subscribe Subscribe Subscribe
APAC Subscribe Subscribe Subscribe
Total Subscribe Subscribe Subscribe

Constellation Software Direct vs Indirect sales

RegionDirect SalesIndirect SalesTotal
Type % Subscribe Subscribe Subscribe
Revenues, $M Subscribe Subscribe Subscribe

Constellation Software Customers - Breakdown by Geo, Size, Vertical and Product

List of Verified Constellation Software Customers


No. of Constellation Software Customers: 125000

No. of Constellation Software HCM Applications Customers: x

No. of Constellation Software Cloud HCM Customers: x

No. of Constellation Software Cloud HCM Subscribers: x


With a robust presence spanning over 100 countries and a customer base exceeding 125,000, CSI has demonstrated consistent growth, building a diverse portfolio of software businesses to deliver substantial returns to both customers and shareholders. Notably, many customers have maintained these applications for decades, minimizing the necessity for CSI to intensify sales and marketing efforts solely for incremental gains from new modules or enhancements.

CSI's strategic focus centers on investing in maintenance, aiming to extend the longevity of the recurring revenue stream. In the past year, for each dollar allocated to maintenance, CSI generated nearly $7 in return. In comparison, Oracle, a prominent enterprise software company, achieved $16 for every dollar spent on maintenance. Maintenance constitutes approximately 64% of CSI's revenues, while maintenance and Cloud revenues collectively contribute to around 61% of Oracle's total revenues.

Constellation Software Market Opportunities, M&A and Geo Expansions

In the ever-evolving landscape of the IT industry, companies often find themselves at the crossroads of organic growth and strategic acquisitions. A case in point is CSI, which has witnessed a substantial increase in revenue, primarily attributed to acquisitions. However, beneath the surface lies a nuanced tale of both organic and inorganic expansion, revealing the intricate dance between sustained growth and strategic business maneuvers.

Q1 and Q2 of 2021 witnessed CSI's revenue spike by 23% and 35%, respectively. While acquisitions played a pivotal role, organic growth at 6% and 7% in the two quarters underscores the company's inherent strength.

The acquisition landscape took a significant turn in September 2020 when Volaris Group, a subsidiary of Constellation Software, acquired Infoview. Specializing in expense management and industry benchmarking, Infoview's integration aligns seamlessly with Volaris' philosophy of fortifying and nurturing mission-critical software entities. Sue Colclough's leadership as the CEO ensures Infoview's autonomy, while Volaris provides crucial support, coaching, and best practices. Infoview's expertise in interpreting expense data for cost-saving measures and strategic decision-making positions it as a valuable asset within the CSI ecosystem. This acquisition not only contributes to CSI's revenue surge but also highlights the importance of targeted acquisitions in addressing specific market needs.

The increase for both the three and twelve-month periods ended December 2017, is primarily attributable to growth from acquisitions as the Company experienced organic growth of 8% and 3% respectively, 5% and 3% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

Looking beyond CSI's success, Constellation Software has been orchestrating strategic acquisitions to bolster its diverse portfolio. In January 2018, Vela Operating Group, a division of Constellation Software, acquired the ProArc unit of Tieto Oyj, emphasizing the company's focus on technical document management software for the engineering and construction industry. This move exemplifies Constellation Software's strategy of leveraging expertise across its 200+ software businesses.

Simultaneously, Total Specific Solutions, another division, acquired Forsikringens Datacenter A/S, a software provider specializing in insurance and pension solutions for the Scandinavian markets. This strategic move solidifies Constellation Software's foothold in the European insurance technology landscape.

Further expanding its reach, Jonas Operating Group acquired Bookassist Holdings Limited in 2018. This acquisition reinforces Constellation Software's presence in the hospitality industry, showcasing the company's ability to tap into various sectors through targeted acquisitions.

Constellation Software Risks and Challenges

Constellation Software (CSI) is strategically exploring acquisitions in the realm of smaller vertically focused software companies. Historically, CSI allocated less than 10% of its Free Cash Flow Available to Shareholders (FCFA2S) to this segment, with only three significant Vertical Market Segment (VMS) acquisitions over its 26-year history. The new strategy aims at participating in 40 to 70 large VMS transactions annually. Despite CSI's awareness of around 80% of such transactions over the last five years, it was involved in only 16% of the sales processes, indicating potential room for increased opportunity.

Like other cloud vendors, CSI grapples with challenges typical of higher churn rates among Software as a Service (SaaS) customers, coupled with increased expenses for acquisition and retention efforts. Furthermore, entering the healthcare vertical presents a distinct challenge, as healthcare is historically intricate for many Enterprise Resource Planning (ERP) vendors. This is evident from experiences like Sage, which sold its healthcare apps business at a loss in 2011. CSI may be addressing possible sluggishness in its Total Specific Solutions (TSS) healthcare customers, as reflected in a 16% drop in professional services revenues in 2015 following substantial contributions to the top line in 2014 after the TSS purchase in December 2013.

Constellation Software Ecosystem, Partners, Resellers and SI

Headquartered in Toronto, Canada, Constellation operates with a global presence, maintaining offices in North America, Europe, and Australia, and employing over 45,000 professionals. The company leverages a robust direct sales force and collaborates with key technology partners, including IBM and Microsoft, in addition to integrating various hardware and add-on components that enhance its core systems. Through its collaboration with Total Specific Solutions, Constellation Software aims to fortify its position in the Benelux and European markets.

Constellation Software Cloud Platform (PaaS) and Infrastructure (IaaS) Details

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  • Constellation Software Public Cloud and Infrastructure (IaaS)
  • Constellation Software Platform (PaaS)
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Research Methodology

Data used in research reports are derived from publicly available documents, continuous surveys of applications vendors, customers, resellers, Independent Software Vendors, systems integrators and other verifiable sources.


Vendor shares and market forecast results are based on a combination of existing databases as well as demand side and supply side research conducted throughout the year with validation from vendors, customers, channel partners and documentations such as earnings releases and 10Q and 10K filings, vertical industry studies, regional and country-level statistics from public and private institutions(i.e. colleges, universities, government agencies and trade associations).


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Buyer Intent: Companies Reading this Research Report
ARTW Buyer Intent uncovers actionable customer signals, identifying software buyers actively reading this research report. Gain ongoing access to real-time prospects and uncover hidden opportunities. Companies Actively accessing this research report include:
  1. Xcel Bespoke, a Australia based Professional Services organization with 20 Employees
LogoCompanyIndustryEmployeesRevenueCountryEvaluated
Xcel BespokeProfessional Services20$2MAustralia2024-08-26