Last month, Constellation Software (CSU) announced a $700m acquisition of Allscripts’ Hospitals and Large Physician Practices business, a top 3 electronic health record (EHR) software provider in the US. This is Constellation’s largest ever acquisition and equates to over 16% of all capital deployed since 2010.

On the same day, CSU also purchased an Australian software business with only 9 employees. We don’t know of any other listed company that has the capacity to make acquisitions on two completely different ends of the spectrum.

CSU could be at an inflection point for two reasons:

  1. The Allscripts investment proves CSU is serious about allocating large amounts of FCF at once even if the business isn’t growing organically.
  2. CSU seems to be on a sustainable run-rate of 100+ smaller, traditional VMS investments per year.

The combination of regular larger deals with a sustainable system to execute 100+ small transactions per year could market the beginning of Constellation Software 2.0.

Over the last 12 months we’ve seen a significant acceleration in FCF deployment - the question is at what rate of return?

We hosted an In Practise Investor Dialogue on CSU to explore the Allscripts acquisition and debate the growth in FCF deployment and long-run ROIC.

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