Constellation is a Cash Aggregator

Constellation Software’s business model is similar to that of an investment firm specializing in asset-light, cash-generating vertical market software operators. The software niche offers attractive economies, including negative working capital, as cash is often received before services are delivered. The firm’s playbook is to identify, acquire, manage and grow operators through a highly decentralized model with a small corporate office and six operating groups. As Constellation has scaled over time, capital allocation decisions have become increasingly decentralized, except for rare large deals that require headquarters approval. The acquired businesses are independently managed and held indefinitely, and Constellation increases cash flow by redeploying excess cash to acquire additional businesses.