Topicus Pt. 1, The Student Becomes the Master

How the Constellation Software spin-off subsidiary is rewriting the play book

The Student Becomes The Master

DISCLAIMER & DISCLOSURE: The author holds a position in Topicus at the date of publication but that may change. The views expressed are those of the author and may change without notice. The author has no duty or obligation to update this information. Some content is sourced from third parties believed to be reliable, but accuracy is not guaranteed. Forward-looking statements involve assumptions, risks, and uncertainties, meaning actual outcomes may differ from those envisaged in this analysis. Past performance is not indicative of future results. All investments carry risk, including financial loss. This analysis is for educational purposes only and does not constitute investment advice or recommendations of any kind. Conduct your own research and seek professional advice before investing.

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Acquisition-as-a-Business (AaaB)

This is now the fifth post in the ‘AaaB’ series. If you missed the others, here are the links:

1. The Secret of Investing in Programmatic Acquirers podcast

2. Relais Group investment analysis

3. Teqnion

4. Fairfax India (podcast/video presentation)

5. Topicus - Part 1

6. Valuing Programmatic Acquirers

7. Topicus - Part 2 - How to value Topicus

8. Judges Sceintic (podcast)

9. Fairfax India analysis to compliment (4) above

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Contents

• The Dream Investment

• The Secret Sauce

• Differentiated Decentralization

• Topicus

• Rewriting the Playbook

• There’s Method to the Madness

• What is Asseco?

• The Magic Formula & Why this Deal Happened Now

• The Capital Allocation Puzzle

• Corporate Structure & Managment

• Valuation of Topicus

• Is Topicus a Good Investment?

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The Dream Investment

To properly appreciate Topicus, it is first important to understand its genesis and the business that spawned it, namely Constellation Software. This is critical background information, so please don’t be tempted to skip it.

If you’re an investor and haven’t heard about Constellation Software ($CSU), you must have been living in a cave for the past two decades.

Founder and CEO, Mark Leonard, is legendary and for good reason. He’s completed over 900 acquisitions of niche software companies, driving stock appreciation of more than 37,500% since the 2006 IPO. That’s not a mistype! It’s a ~37% compound annual growth rate sustained for twenty years.

Sure, he looks like a wizard, but who cares? If he can magic these returns year after year then I need to understand what is in his book of spells.

Mark Leonard, Founder of Constellation Software

Had you invested $25,000 at the IPO and then done absolutely nothing, just bought and held, by today it would have grown close to $10 million.

Constellation is a phenomenal company. But even phenomenal companies eventually run into the laws of large numbers.

Here’s the challenge: programmatic acquirers start by making small acquisitions, which are relatively easy to find. But as the company grows, it faces a fork in the road. Do you start buying bigger companies? Or do you just keep doing more of the same small deals?

Constellation chose volume and it was arguably the right choice. Think about Warren Buffett sitting on over $325 billion of cash because he is looking for an elephant sized deal that will move the needle at Berkshire Hathaway. Mark Leonard avoided falling into that elephant trap. He grows the business big by staying small scale.

Last year they completed roughly 130 acquisitions. Think about that for a second. There are about 220 working days in a year. They’re closing a deal more frequently than every other working day.

It defies belief. But Mark Leonard made it happen.

The question is: how much further can they push this? The rate of growth at Constellation cannot continue at the same pace indefinitely: not because the strategy is flawed, but because the company has arguably become too big.

Additionally, it’s important to note that Constellation doesn’t target young companies - it wants businesses that have been around for 15 to 20 years, are durable, and have long-standing relationships. Much of the low hanging fruit in the North American market has been picked by Constellation (and some others). Over time, accretive acquisitions will inevitably become more difficult to find.

So what do you do when your brilliant model starts bumping against its own success?

You replicate it by creating new platforms that each continue making small sized acquisitions. Mark Leonard has decentralized in the extreme. Most foster autonomous operational units but centralize cash flow collection and subsequent allocation. The Constellation Group is different. It implemented a “Keep Your Capital” policy aimed at taking operators and turning them in to capital allocators. Executing 130+ acquisitions a year proves that it works. And if any platform shows promise to stand alone, you spin off new entities, each working at smaller scale, in specific niches and in different geographic regions, with the same playbook.

Enter Topicus ($TOI) and Lumine ($LMN), spun-out in 2021 and 2023 respectively, with each operating in a defined niche, primarily in Europe.

In terms of relative performance, all are compounding strongly - unsurprising since they all run the same operating model. The chart below shows cumulative return in percentage terms rebased to Q1 2023 which is the date that Lumine made its stock market debut. (Note: Constellation retains significant holdings in both Topicus and Lumine Group, so their success is also evident in Constellation Software’s results)

Constellation Software vs. Topicus vs. Lumine Group

Why do these Vertical Market Software (VMS) programmatic acquirers do so well? What gives them such a durable edge?

In essence, they have three structural advantages over most other businesses—including other Acquisition-as-a-Business (AaaB) holding companies. These aren’t minor benefits. They’re fundamental moats that compound year after year.

1. Negative working capital (a.k.a. free money)- VMS customers pay subscriptions upfront, which means the business gets financed on a zero-cost basis. You’re running operations with other people’s money, before you’ve even delivered the service. This dynamic is a huge bonus. It’s the same structural advantage that’s made Costco and Walmart thrive for decades. Cash comes in the front door before it needs to go out the back door. It’s what Buffett refers to as ‘float’.

2. Absence of cyclicality - The software these companies sell is mission-critical. A doctor using software to manage patient records and billing doesn’t simply stop paying for it during a recession. A municipality running its permitting system can’t just turn it off when budgets get tight. This isn’t discretionary spending. It’s infrastructure. And infrastructure doesn’t go away when times get tough, it just generates predictable, recurring revenue regardless of what’s happening in the broader economy.

3. Capital-light - Horizontal software constantly runs the risk of becoming obsolete or commoditized and so requires constant R&D spend to ensure that it remains competitive. It needs the latest features, the slickest UI, all the bells and whistles. It’s an expensive treadmill. Vertical software is entirely different. That’s what makes it attractive. It doesn’t need to be sexy. It doesn’t need cutting-edge design or flashy new features. It just needs to work and be dependable (see image below - this is one of Constellation Software’s products, built in 1996 for the Seattle Justice System, it looks antiquated and it is, but it is still in use today, almost 30 years later. That’s an investment made decades ago, requiring little to no additional capital, still generating strong revenues year after year.)

   

   Constellation Software supplies software to the Seattle Justice System that was produced in 1996.

   That’s the beauty of vertical software. Once it’s embedded in a customer’s workflow, it becomes infrastructure. And infrastructure doesn’t need to be reinvented every two years.

   On a related note, some people worry that AI will disrupt the software industry as it is now faster and cheaper to create new applications.

   In the commoditized horizontal software segment, that threat is real. If someone can spin up a competing product in weeks instead of years, your moat evaporates fast.

   But vertical software? Different story entirely.

   Vertical software is all about sticky solutions with high switching costs. Once a hospital has been running the same patient management system for fifteen years, with all their workflows built around it, all their staff trained on it, all their historical data locked inside it, they’re not ripping it out just because some AI-generated alternative shows up promising to do the same thing.

   The switching costs are enormous. The risks are too great. And for what? To save a few percentage points on licensing fees?

   That stickiness provides a deep moat for VMS incumbents. And here’s the twist: AI may actually widen that moat.

   Why? Because now upgrading existing software is quick and easy. You can add new features and modernize interfaces with very little capital being deployed. So rather than stifle the capital-light VMS model, AI is more likely to enhance it.

   The moat doesn’t shrink. It deepens.

The Secret Sauce

These three structural advantages combine to create something almost magical: cash conversion ratios exceeding 100%.

What does this mean?

The company continually generates more free cash flow than the earnings reported in its income statement.

How can this be?

It comes down to favorable cash flow timing. Under accrual accounting rules, when a customer pays an upfront subscription fee, the company records it as deferred revenue and a liability on the balance sheet because they’ve received payment but haven’t yet delivered the full service over the subscription term. Revenue gets recognized gradually as the service is delivered.

But the cash is already in the bank. Available immediately for redeployment.

And here’s the kicker: this also delivers a massive tax benefit. Tax systems don’t tax companies at the point of cash receipt, they tax based on earnings recognition, which occurs later.

So while most companies have to finance tax liabilities before receiving the cash (a drag on performance), VMS businesses receive and redeploy cash long before the tax falls due (an amplifier of performance).

It’s a timing arbitrage built into the business model itself. And it compounds relentlessly.

Differentiated Decentralization

One aspect of Constellation Software’s playbook that’s perhaps most underappreciated is its differentiated approach to decentralization.

Most holding companies that adopt the AaaB model insist on decentralized operations. They let each business run itself, but they centralize capital allocation. Head office controls the purse strings and decides where money gets deployed.

Mark Leonard did it differently.

He architected a system where capital allocation itself is gradually decentralized to platforms within the group. Those platforms can choose to use capital for scaling organic growth, making further accretive acquisitions, or a combination of both. The metric of focus is always return on capital (ROIC): allocate it where it can be used most productively.

This initiative was named “Keep Your Capital”, abbreviated to KYC, and announced by Mark Leonard in 2018. Platform leaders have their compensation linked to ROIC with a target to achieve at least 25% - a high bar - but it means that the capital deployed in the platform should double every three years.

This is not stock based compensation, which Constellation refuses to do. It isn’t cream on top of a high base salary either. This is performance based salary. Employee earnings are directly linked to ROIC achieved. Poor capital allocation will dilute returns and take salaries down with them. So the KYC initiative forces middle managers to focus on optimizing both M&A and R&D opportunities to maintain existing high ROIC rates.

As Mark Leonard explained in 2018,

“We are trying to take operators and convert them into capital deployers, and we hope very much that it works.“

Why did he implement KYC?

Mark Leonard didn’t want to find himself in a Berkshire Hathaway situation, sitting on a mountain of cash, because uninvested capital dilutes ROIC. There are very few elephant sized opportunities, so he wisely chose to seek out a higher volume of smaller sized opportunities instead. Additionally, he knew that Constellation had been successful acquiring in the lower mid-market, buying from owner-operators who had built businesses exhibiting certain characteristics, so why change a winning formula?

Head office could never achieve two acquisitions every three days (Constellation’s current run rate) due to capacity constraints. There simply aren’t enough hours in the day or people in the central team to achieve this. But collectively, the platforms have been able to achieve this number.

This model has enabled Constellation to scale without limitation and avoid the trap that Warren Buffett seems to have fallen in to. If a platform becomes too large, it will be split out into new more manageable sized operating units. It’s even allowed Constellation to spin off entire platforms, like Topicus and Lumine. Each platform operates independently, each running the same playbook at smaller scale in their own niche domains.

It’s not just decentralization. It’s fractal decentralization that scale infinitely.

Mandelbrot Fractals scale infinitely

The model replicates itself at every level, allowing the organization to grow indefinitely without hitting the bottlenecks that constrain most holding companies.

That’s why Constellation keeps compounding. That’s why the model works.

It’s the same model being deployed within Topicus.

Topicus

This analysis is solely about Topicus, which has long been a compelling investment story in its own right.

Its public float is ~64% with the remainder of the business held by Constellation Software and other insiders. Constellation also has one super voting share, providing it with de-facto control over Topicus.

The playbook? Simple, disciplined, devastatingly effective.

It’s mastered the same high-return acquisition model as its parent in the Vertical Market Software (VMS) space, but it’s doing it in Europe, where the market is more fragmented, competition is lighter, and the pipeline of attractive targets is deeper.

It’s Constellation’s playbook, but running at a scale Constellation was at over a decade ago, in a geography where the opportunity set is still wide open.

That’s the magic. Topicus gets to be the early-stage Constellation all over again. To date it has acquired over 180 companies in 40 verticals, accumulated 8,000+ employees, serving 100,000+ customers across 26 countries.

It emphasizes long-term ownership, a combination of acquisitive and organic growth, combined with capital light decentralized operations.

It acquires small-to-medium sized privately owned software businesses that provide specialized, mission-critical solutions (think software for education, healthcare, social services, local/central government, financial services, legal services, real estate, automotive, maritime and professional associations). These industry-specific (vertical) solutions face less competition, typically have high switching costs and command premium pricing with high customer retention rates.

Acquisitions typically involve purchasing either an entire business or a controlling interest. Notable deals include a 72.68% stake in Sygnity, a Polish software provider serving the banking, financial, public, and utility sectors; a 60% stake in GeoSoftware, a U.S. company specializing in geoscience software for the oil and gas industry; and a 60% stake in GeoActive, a U.K. firm offering subsurface exploration and monitoring solutions. Taking control while allowing existing operators to retain a stake can be advantageous, as it keeps those running the business motivated and ensures alignment between all parties.

Once acquired, these businesses operate independently on a federated basis, keeping their local branding and management teams intact. This approach minimizes disruption, drives exceptional customer retention and generates durable recurring revenue through multi-year licensing, maintenance contracts and professional services. This cash flow is the lifeblood of the programmatic acquisition model.

Since IPO it has executed numerous acquisitions, with the pace picking up significantly in 2025. Total consideration for acquisitions from 2021–2024 exceeded €790 million, with an additional €700+ million deployed in 2025 alone.

By focusing specifically on Europe’s fragmented market, Topicus faces less competition than its parent company, ensuring a perpetual pipeline of high-return acquisition opportunities. Watch the cash flow roll in. Allocate it to new acquisitions. Rinse and repeat. Organic and non-organic compound growth working in perfect harmony. That’s the playbook.

But then came the Asseco Poland S.A. investment and everything seemed to have changed.

Rewriting the Playbook

This wasn’t just another acquisition. It marked a major, confident departure from the tried-and-tested model, introducing a powerful new layer of growth and geographic dominance.

First, Asseco is not some small, niche, privately owned vertical software company. It’s a publicly traded behemoth with an enterprise value around $5.5 billion. Second, Topicus, via its Total Specific Solutions (TSS) subsidiary, isn’t taking a controlling stake. It’s acquiring a minority holding.

Wait, what? Topicus doesn’t do minority stakes in massive public companies. That’s not their thing.

It is now!

There’s Method To The Madness

The investment unfolded in two distinct phases between January and October 2025, ultimately securing Topicus nearly a quarter of one of Europe’s largest tech companies.

First, they picked up just under 10% from Cyfrowy Polsat, carefully staying below key regulatory thresholds. Then they swooped in for Asseco’s treasury shares, another 14.84%, bringing their total stake to roughly 24.8%.

The Topicus corporate structure (EOY 2025)

The price tag? Close to half a billion dollars. That’s more than double their next-largest acquisition ever. For context, Topicus’s typical deal size hovers around €7-15 million. Its previous record was around $230 million for a full buyout of Cipal Schaubroeck, a Belgian government software firm.

This was playing in an entirely different league, with a differentiated target.

The numbers are almost too good to believe and on paper, it’s already a home run.

Asseco generates over half a billion dollars in free cash flow annually. Topicus bought roughly 25% of that for about half a billion dollars. They acquired their stake at less than 4x free cash flow.

For those of you who live and breathe EBITDA multiples, here’s another way to look at it: on a last-twelve-months basis, Asseco generated $777 million in EBITDA. The pre-money enterprise value of the business was $2.8 billion, so Topicus bought in at less than 3.6x EV/EBITDA.

In today’s market, for a software company throwing off this kind of cash? That’s borderline absurd. Topicus saw an opportunity and pounced. Mr Market missed it, but soon caught up. Topicus paid 85 PLN per share back in January. Today, Asseco trades at 215 PLN. That’s up 253% in nine months. Nice trade!

But here’s the thing: quick profits were never the point. Topicus has no intention of selling: not next year, not in ten years, probably not ever. This wasn’t a trade. It was about something much bigger: a fundamental evolution of entire strategy at Topicus.

The financial win is nice. The strategic repositioning is transformational.

To understand why, you need to know what Asseco actually is and how it fits in the Topicus business, so let’s dive into the detail.

What is Asseco?

Adam Góral founded Asseco back in 1991 in Rzeszów, Poland, transforming what was once a state-owned computing company into something radically different. They started with software for local businesses and grew into one of Poland’s first major tech success stories.

Adam Góral, founder and CEO of Asseco

The real turning point came in 2004. Asseco merged with a Slovak firm, rebranded and went public on the Warsaw Stock Exchange. That IPO became the launchpad for an aggressive international expansion across Europe and beyond.

And here’s where things start looking very familiar, very ‘Constellation-like’. Over the next two decades, Asseco executed more than 140 acquisitions.

They pushed into the Czech Republic, Germany, Israel, the US and numerous regions across Europe and Asia. Notable deals included purchasing Polish software companies Softbank and Prokom, acquiring Portugal’s Exictos SGPS (2015) for access to Lusophone Africa and taking over Israel’s Formula Systems (2010), a NASDAQ-listed firm that helped transform Asseco into a true multinational. The company also pushed into cybersecurity and banking software, acquiring ComCERT and establishing Adesso Banking Solutions in Germany.

By the 2020s, Asseco had become one of Central and Eastern Europe’s largest tech companies: 34,000 employees, 62 countries, serving banks, insurers, healthcare systems, energy providers and telecom giants worldwide. Revenue topped €3.7 billion in 2023, with 90% coming from international sales.

So what does Topicus actually get out of this?

The strategy is multi layered.

Consider that in North America, the English and Spanish language are prevalent with French being widely spoken in parts of Canada. Three languages provide access to the entire region. In contrast, the European Union has a rich linguistic diversity, boasting 24 official languages with over 250 indigenous languages spoken. This makes penetrating the European market more challenging.

Topicus dominates Western Europe. Asseco dominates Central and Eastern Europe, the Balkans and Israel. These footprints barely overlap, which means cross-selling opportunities are enormous. Topicus can push Asseco’s products west. Asseco can push Topicus’s products east.

Next, Asseco is a VMS powerhouse operating across high-barrier-to-entry sectors: banking, public administration, utilities. Over 80% of its revenue comes from proprietary software - exactly the sticky, recurring revenue Topicus loves.

Then there’s the benefits of scale to enable both companies to compete on a global stage. Adam Góral spelled out why this matters:

“Our groups are built through acquisitions and companies operate within a federated model. I chose to partner with TSS because I believe that in a time of increasing dominance by global software giants, only capital consolidation among major European companies provides an opportunity to create teams that, in the coming years, can effectively compete for greater market share.”

Translation: American tech giants are eating Europe’s lunch. The only way to fight back is for the best European software companies to join forces.

The best part is that the operating models of both companies are very similar. Asseco runs a decentralized “federation” model where acquired companies largely retain their operational independence.

Sound familiar? It should. It’s the Constellation playbook, executed independently on the other side of Europe.

Ramon Zanders, CEO of Topicus’ TSS Group, said it best:

“We value Asseco Group’s achievements and growth over the years, hence our decision to become an investor… Our approaches to operating successful software companies are like-minded - we have a similar decentralized organizational structure with ownership close to the market and focus on bringing our customers added value. Asseco’s strategy and achievements are a good match with our long-term strategy…Together, we will build a partnership of two strong European IT Groups based on perpetual ownership, decentralized governance and client centricity.”

Translation: We found our European twin and we’re teaming up.

The Magic Formula & Why This Deal Happened Now

Here’s where Topicus’s real genius shows up: not in what they bought, but in how they bought it. They deploy the Constellation Group advantage. A magic formula.

Constellation Group companies don’t participate in auctions. They refuse to use brokers to source acquisitions. Instead, they’ve built what’s probably the world’s most extensive database of software companies - estimated to contain close to 100,000 names (they are a data driven company and aim to have every software company in the world included) - and they play the long game.

They reach out to owners of businesses with strong economics and durable franchises. They build relationships. Often years before any deal happens.

Most of these companies aren’t for sale. Yet.

Each company in the database receives two or three calls each year, just to keep the dialogue open and to nurture the relationship. It also helps to ensure that all data is clean and up-to-date. Constellation has a rule that if a business relationship manager has had meaningful contact with a company in the past year, no one else can contact that business. But if the year lapses, that company becomes fair game - people are incentivized to maintain meaningful contact or else lose their lead. Additionally, if a company in the database is sold to someone else and Constellation didn’t get a look, this reflects very badly on the business relationship manager and could ultimately lead to dismissal. All of these factors result in no stale records in the database.

Unlike PE funds and many other acquirers, the first contact with a prospective target isn’t made by number crunchers and business analysts wearing suits and talking about EBITDA multiples. Instead, it’s made by Constellation Software people with real experience in technology businesses, people who understand the ins and outs of software and software sales. People who’ve actually built things.

The founder of the target company is likely to be a similar person - a technologist, an engineer, someone who cares deeply about the product and the customers - so there is chemistry, they are on the same wavelength and speak the same language.

This is important. Actually, it’s critical.

It never starts as a conversation about buying a business.

It’s a simple introduction - Hi, this is who we are, we admire the business you have build and thought it would be mutually beneficial to connect.

Then there’s a conversation about software. Operations. Opportunities and challenges. The kind of technical shop talk that founders actually enjoy having with peers who understand what they do.

Why would a founder CEO of a company not for sale engage in this sort of conversation from an unsolicited caller?

That’s a great question. It isn’t easy. But as time passes, very few people in the software space have not heard of Constellation Software, so they are delighted to receive a call and open to chat. It’s not too dissimilar to Warren Buffett calling up to talk about your business - who wouldn’t take that call?

So as Constellation Software has grown, this process has become easier. That reputation is a cornered resource - no one else has access to it. Most other companies would struggle if they tried to emulate this process.

Most don’t want to emulate it. It’s an entirely different approach to that deployed by most other acquirers. It has to be, because the target company isn’t immediately available for sale. An acquisition may occur many years into the future, or perhaps not at all.

Most buyers can’t operate this way. They need deals now. They have fund timelines, deployment pressures, investment committees breathing down their necks. They can’t afford to spend three, five, seven years building a relationship with someone who might never sell.

But Constellation and its related companies can. They’re not playing the same game. They’re not optimizing for this quarter or this year. They’re building a pipeline that will pay dividends for decades.

So, when that founder finally does start thinking about succession, when they realize they want to step back but can’t bear the thought of selling to some PE firm that’ll gut the business, laden it with debt and flip it out within five years, who do you think they call?

The people who’ve been checking in for years. The ones who actually understand what they’ve built. The one’s that will preserve the business and its culture, building upon the foundations already laid. The ones with whom you have built a relationship, not those only interested in a transaction. This is the point, at the end of the courtship, where the business relationship person will bring in an M&A expert to do the due diligence (almost always done in-house) and then seek to close a deal if a valuation can be agreed.

This process is a huge competitive advantage. Think about how difficult it would be for someone else to build a similar database and cultivate similar relationships. It’s taken Constellation decades. It’s a formidable moat. It’s why most other programmatic acquirers use brokers to source deals.

The former CEO of Swedish programmatic acquirer LIFCO, once explained: “We use brokers to source deals because you can only buy a business if it’s for sale.”

That’s true enough, brokers are more time efficient, but here’s the problem: they introduce competition, which means paying up for acquisitions. You’re bidding against other buyers, pushing multiples higher, eroding returns.

Constellation doesn’t play that game. They don’t participate in auctions. They don’t compete on price with financial buyers chasing IRR targets.

But here’s the fascinating part: Constellation closes roughly 130 deals each year from a database of 100,000 companies. That’s a 0.13% annual conversion rate (just over one-tenth of one percent).

Most people would look at that and say it’s wildly inefficient. All that effort for such a tiny hit rate?

But that’s missing the point entirely.

Constellation pays in effort to achieve the best deals - the lowest EV/EBITDA multiples for its acquisitions. Patient, methodical, relentless effort. Relationship-building that takes years. Follow-ups that never stop. A process that produces exceptional returns on capital and compounds trust the same way their capital compounds returns.

When you’re only buying from people who want to sell to you specifically, not just to the highest bidder, you get better businesses, better prices and better outcomes.

Nobody else can replicate it, because nobody else has spent twenty years building the database and the relationships. It’s about framing a narrative that sets Constellation apart.

As with most successful businesses, such as Toyota or Danaher, the Constellation family of businesses are very process driven. That’s what distinguishes them from other programmatic acquirers. That’s their moat. That’s why it works so well.

Topicus has access to that resource.

When a founder starts thinking about retirement and succession, Constellation is often the first call they make. And it’s easy to see why. Private equity firms might bring money to the table, but they’re rarely good partners if you care about your company’s legacy, your customers or your employees.

Constellation’s model works because it exploits a clear market inefficiency. The businesses it targets are typically too small to interest traditional private equity firms, for whom a €10–20 million deal just isn’t worth the time. On top of that, the founder’s impending exit creates a leadership vacuum that most financial buyers have no interest or ability to fill.

Constellation offers a different kind of solution: permanent capital, light-touch ownership, and true continuity. It’s the same pitch Warren Buffett makes at Berkshire Hathaway: buy great businesses and hold them forever, using balance sheet capital rather than short-term fund money.

The result is elegant and mutually beneficial. The people best equipped to run the company - the loyal insiders who’ve built it - get the chance to stay at the helm, even if they don’t have the capital to buy it themselves. Topicus steps in to bridge that gap. The founder exits with peace of mind, the managers gain ownership and autonomy, and the business continues to thrive. Everyone wins.

That’s exactly what happened with Asseco.

Adam Góral, now in his seventies, designated Rafał Kozłowski, a long-time Asseco executive, as his successor. But Kozłowski doesn’t own the company. Góral does. He wants to step back without triggering chaos, losing control to opportunistic buyers, or watching his life’s work get carved up by financial engineers.

Enter Topicus.

The deal solves everything. Góral retains about 10% through his family foundation and becomes Chairman of the Supervisory Board, still involved, still influential, but not running the day-to-day. Kozłowski gets to lead without the burden of finding acquisition capital. And Topicus commits to never exceeding 27.96% ownership, staying below the threshold that would trigger a mandatory tender offer.

Message to the market: We’re not taking over. We’re partnering.

The market approves; the Asseco share price is up 127% in the nine months since Topicus became involved.

The Capital Allocation Puzzle

But wait. There’s a problem.

Topicus and the broader Constellation Software group have strong ideological convictions about capital allocation. Stock-based compensation? They hate it. They require employees to buy shares in the open market with their own money—undoubtedly best practice, but so rarely practiced by others. And while they’ve paid occasional dividends, they only do so when there’s surplus capital - never as a matter of policy.

Dividends? They’ll pay them occasionally when there’s surplus capital sitting around with nothing better to do, but never as policy, never as a regular thing.

Asseco does both. Liberally. The dividend capital allocation lever is always the first to be pulled, regardless of prevailing circumstances and opportunity costs. Stock based compensation is routine.

So how do you reconcile these two completely different philosophies?

The same way Berkshire Hathaway reconciled investing heavily in Apple, a company that loves dividends and stock compensation, despite Warren Buffett’s well-known aversion to both in the company he manages.

Did Buffett abandon his principles? No. He just recognized that minority stakes in exceptional businesses are valuable even when management does things differently than you would.

You hold your nose on the stock-based comp. Maybe, over time, you exert some influence and nudge behavior in a better direction. But it’s not a deal-breaker, not when the underlying business is this strong.

As for dividends, here’s where accounting gets interesting in a good way.

When you hold a significant minority stake¹ (typically over 20%) and where that acquisition is not consolidated in your own accounts, you get to use equity method accounting. What does that mean in plain English?

Topicus recognizes its share of Asseco’s profits in its own income statement. Dividends received reduce the carrying amount of the investment rather than being recognized as taxable income (because earnings were already recognized in the consolidated accounts).

However, Topicus doesn’t automatically receive cash equal to its share of Asseco’s earnings unless Asseco declares a dividend, so the payment of dividends and high payout ratio is quite convenient.

Topicus effectively receives the dividend and redeploys into high-return acquisitions elsewhere. The dividend becomes just another cash flow to reallocate, which fits perfectly into the programmatic acquisition model.

It’s pragmatic. It works. And it turns what looked like a philosophical clash into a feature, not a bug.

But here’s where things get really delicate.

Asseco’s new leadership team, the people who’ll actually be running this €3.7 billion operation, don’t own much of the business right now. That’s a problem. You can’t expect people to make great long-term decisions when they don’t have real skin in the game.

Topicus knows this. Their entire philosophy is built on owner-operators who eat their own cooking. But how do you solve it here without creating a mess?

You can’t just hand out stock options. That violates everything Constellation stands for. But you also can’t march in demanding the new management team buy millions of euros worth of shares out of pocket during a sensitive succession transition. That’s a great way to spook everyone and watch your key people head for the exits.

It’s a tightrope walk. You have firm principles about how insiders should acquire ownership. But you also need to avoid rocking the boat at exactly the moment when stability matters most.

How to Do Stock Compensation Without Selling Your Soul

Here’s how Topicus plans to solve it and it’s a masterclass in doing stock-based compensation the right way, even if you hate the concept.

• First: no dilution. Zero new shares get issued. That alone puts them ahead of 99% of public companies.

• Second: vesting ties to long-term objectives and return on capital—not short-term profit theatrics designed to goose the next quarterly earnings call. This matters. Most companies design their compensation to reward whatever makes the stock pop in the next twelve months, consequences be damned.

• Third, and this is the really impressive bit, no shares go to management until the company buys them first in the open market. The full cost gets captured in the accounts upfront. No games. No accounting sleight-of-hand.

  This is straight from the Prem Watsa playbook at Fairfax Financial, and it’s so different from standard practice it’s almost radical.

Why This Matters (And Why Most Companies Do It Wrong)

Think about how stock-based compensation typically works at other listed companies. They don’t actually buy the shares upfront. They grant stock compensation with delayed vesting with the intention to buy it later, ”we’ll figure out the cost when they vest.” This lets them book it as a “non-cash expense” and pretend it isn’t real money leaving shareholders’ pockets.

It distorts performance metrics. It inflates reported profits. It makes the stock price look better than it actually is. Then, when vesting day arrives and they finally have to offset the dilution by buying shares in the market, they’re paying inflated prices, which costs shareholders even more. Buy high (from the market), sell low (to insiders) - exactly the opposite to how equity dealing should be done.

It’s a game designed to make management look good while quietly pickpocketing shareholders. It’s a wealth transfer of shareholder corporate capital to enrich insiders. It’s abhorrent, but regulators don’t recognize it as abusive and shareholders acquiesce - so unscrupulous managers smile and continue to enrich themselves.

Topicus won’t play that game. They’re paying the real cost upfront, in cash, at today’s prices. Everyone knows exactly what it costs. No surprises. No accounting magic.

If you’re going to do stock-based compensation, and sometimes you have to, this is how you do it honestly.

That’s where the real leadership shows up. The letter Topicus sent to Asseco shareholders (below) explaining how they will deal with this is a masterclass in transparent, thoughtful communication. No corporate jargon. No investor relations spin. Just straight talk about a complex situation and how they plan to navigate it.

This is the kind of behaviour and shareholder communication that matters: direct from the CEO, explaining decisions and strategy in clear, no-nonsense language. It’s what separates great management teams from the rest. These are the companies you want to invest in for the long-term.

Corporate Structure & Managment

Topicus operates with a lean, decentralized executive team emphasizing group-level autonomy. Key members include:

• Robin van Poelje: Chairman and CEO - owns 48,100 shares

• Jamal Baksh: Chief Financial Officer (CFO) and Board Member - owns 5,985 shares

• Daan Dijkhuizen: Group CEO, Topicus Operating Group (focuses on public sector verticals like education and government) - owns 206,027 shares

• Han Knooren: Group CEO, Total Specific Solutions Public (oversees public services software) - shareholding not ascertained

• Ramon Zanders: Group CEO, Total Specific Solutions Blue (manages private sector verticals like finance and legal) - owns 446,870 shares

Topicus Inc Senior Management: Robin van Poelje (top left), Han Knooren (top right), Daan Dijkhuizen (bottom left), Ramon Zanders (bottom right)

Insiders currently hold 2.2% of the company (1.83 million shares) worth around $274 million CAD.

The board includes additional directors with VMS expertise, but the executive focus is on these operational leaders.

Robin van Poelje has always held economics and management roles, having earned a Bachelors degree in Economics from the University of Groningen and a Masters degree from École Supérieure des Sciences Économiques et Commerciales (ESSEC).

He was appointed CEO of Topicus Inc in November 2021, shortly after its IPO, but he is not new to the business. In fact, not only is he integral to the creation of the company, but he has been heavily involved in a senior capacity for nearly 15 years.

What’s the story?

Robin van Poelje founded Total Specific Solutions (TSS) B.V. in the Netherlands back in 2006. It’s a large European vertical market software firm specializing in applications for both the public and private sectors. Constellation Software then acquired TSS in 2013, for approximately €100 million, with a view to gaining European exposure.

In 2021, Constellation Software acquired another Dutch vertical market software business named Topicus.com B.V., subsequently merging it with TSS and spinning it out as a separate public company on the Toronto TSX Venture Exchange as the holding company that we now refer to as Topicus Inc.

TSS now functions within Topicus. In fact, Topicus operates via specialist acquisition platforms within the business, mirroring its parent Constellation Software’s decentralized model. It is divided into semi-autonomous operating groups, each functioning as a dedicated acquisition and management platform tailored to specific verticals, regions, or customer types:

• Topicus Operating Group (led by Daan Dijkhuizen): Focuses on purpose-driven, tech-savvy teams in public sector markets (e.g., education, healthcare, government). Emphasizes innovation and customer empowerment through SaaS solutions.

• Total Specific Solutions Public (led by Han Knooren): Targets public services software, with a customer-demand-driven approach for mission-critical tools in social services and local government.

• Total Specific Solutions Blue (led by Ramon Zanders): Concentrates on private sector verticals (e.g., finance, legal, real estate, retail), building full-stack FinTech and professional services platforms.

These groups acquire, build, and manage ~135+ portfolio companies independently, with central oversight only on capital allocation. This structure enables focused expertise, rapid integration of acquisitions and avoidance of bureaucratic silos, driving 20%+ annual revenue CAGR since inception.

Returning our focus to CEO Robin van Poelje, since he both founded TSS and served as its CEO from 2010 until the 2021 spin-out, continuing in an advisory capacity for TSS elements within the Topicus group, one might argue that his tenure at the helm of this business is approaching 15 years.

Long tenured CEOs, with both an excellent track record and skin in the game, make for excellent stewards of shareholder capital.

There’s one area where Topicus management could definitely do better: investor communication.

The company doesn’t publish regular, candid shareholder letters from its CEO in the same style as Constellation Software’s widely regarded Mark Leonard letters, which have become legendary in investment circles for their honesty, insight, and willingness to share what’s actually working and what isn’t.

Instead, Topicus adopts a more limited communications policy. Conference calls are rare. Public Q&As even rarer. The approach is formal, governance-focused, metrics-driven: laying out facts and financial data while leaving out opinions, insights or commentary.

The implicit message to investors is clear: “We’re focused on what matters and waste neither time nor corporate capital attempting to present the company through rose-tinted lenses. Here are the facts. You form your own opinion.”

It’s not terrible. In fact, it’s better than the glossy, investor-relations-scripted nonsense most companies churn out quarterly. At least Topicus isn’t pretending. At least they’re not spinning narratives or manufacturing excitement.

But it doesn’t live up to the gold standard set by Mark Leonard, not even close.

And that’s a missed opportunity. Because great shareholder letters don’t just inform investors, they attract the right type of investors. The ones who think long-term. The ones who understand compounding. The ones who won’t panic-sell at the first sign of turbulence.

Valuation of Topicus

Quantitative Note

Analysing a holding company like Topicus isn’t easy, particularly where they have a controlling interest in an acquired company but there are non-controlling interests (NCI), also called minority interests.

In consolidated financial statements, if Topicus owns more than 50% of a subsidiary, it must include 100% of the subsidiary’s financial results in its own, although a not insignificant part of that belongs to minority interests rather than to Topicus.

As you can imagine, this leads to distortions in consolidated reports that need to be adjusted accordingly.

For instance, when calculating ratios like EV/EBITDA or EV/Revenue, the denominator will be inflated by minority interests, creating an inconsistency in the multiples used for valuation. If the value of NCI is substantial compared to overall equity, this will have a material impact on ratios and implied valuation. At Topicus, NCI is ~37%.

Adjustments need to be made to the Income Statement, Balance Sheet and Cash Flow Statement metrics.

So use caution if you use third party financial websites to access company data. It will all be unadjusted and misleading. This will impact the way Topicus appears on screeners, so beware.

Fortunately, the Constellation Software group, including Topicus, offer assistance. They publish a metric which they call ‘Free cash flow available to shareholders’, abbreviated to FCFA2S², which makes the requisite adjustments (see below).

For the 6 months to June 2025, FCFA2S was €145 million (~$170m USD)

A full quantitative analysis is beyond the scope of this analysis, that part is down to you.

But let’s run some back of the envelope numbers, just for fun. Unless stated otherwise, all numbers are converted to USD to keep things simple.

As mentioned earlier, Topicus paid roughly $500 million USD for about 25% of Asseco, which generates over $500 million USD in free cash flow annually. Now let’s zoom out and look at what this did to the overall picture for Topicus.

Although the share count for Topicus is quoted at ~83 million, including NCI it is actually closer to 130.2 million:

This puts the real market cap at $10.4 billion USD and the enterprise value at $11 billion.

Before the Asseco deal, Topicus had a free cash flow of €290 million Euro ($302m USD) in unadjusted annualized free cash flow (a ~34x EV/FCF multiple).

Then it spent 4.8% of its enterprise value on acquiring the Asseco stake which increased its free cash flow by 41.4%. Not bad, huh?!

And that’s before accounting for any synergistic cross-selling opportunities flowing from the deal, the ability to push Topicus products east and Asseco products west across Europe.

Here’s where it gets interesting.

Both companies are growing free cash flow at strong double-digit rates. So let’s be conservative and assume that over the next year or two, Asseco hits $600 million USD in free cash flow while Topicus (excluding Asseco cash flows) reaches $400 million USD.

That means Topicus would be looking at $550 million in combined annual free cash flow - $400 million from its own operations plus 25% of Asseco’s $600 million.

Assuming that the outperformance of the VMS model as executed by Topicus allows it to maintain a 34x multiple of EV to free cash flow, you get an implied valuation of $18.7 billion adjusted enterprise value. On $600m net debt, that implies a market cap of $18.1 billion. On a 130.2m share count, that looks like 139 USD per share (or $193 CAD per share).

In other words, Topicus may be trading at a significant discount to near-term forward free cash flow forecasts.

That’s not some pie-in-the-sky DCF model stretching out twenty years with heroic assumptions. That’s just looking at what these businesses are likely generating in cash over the next couple of years and applying a reasonable multiple.

This is without considering that Topicus increases its majority stakes over time through the use of options and earn-out structures. This is demonstrated in the table above where it can be seen that the blended FCFA2S ratio is increasing sequentially:

• 2023 ~60.4%

• 2024 ~61.1%

• 2025 ~62.85%

Also, while the cost of the Asseco deal has already hit the balance sheet, the first full year of Asseco’s cash flows has yet to be captured in Topicus’s reported numbers. There is a critical time lag between the cost of the acquisition and the arrival of the benefits. So the market hasn’t priced in the Asseco impact yet. But it will.

But beware, when you look at the multiples published on financial websites, the ones showing trailing twelve months, they’re backward looking and they miss this nuance entirely. Topicus will screen as expensive. That’s the problem with screeners. But for savvy investors who know how to analyze a business properly, this creates an opportunity. Swoop before the market catches up - that’s the name of the game.

Here’s the kicker: despite its improving fundamentals, Topicus just experienced close to a 25% drawdown over the past three months. In CAD terms (remember Topicus is listed in Canada), it closed at $136 on 16th October 2025, when it traded at $196 as recently as July.

Update January 2026: the share price pulled back to $109 CAD

The share price is now back to where it traded at the beginning of 2024, prior to the Asseco deal. Is it reasonable to believe that deal added zero value to the business?

If the back of the envelope calculations above are close to correct, implying that the stock trades at about half of its intrinsic value based on two year forward projections, there is a huge margin of safety at these levels.

Pullbacks often create interesting entry points, especially when the underlying business is getting stronger.

If these numbers are correct, it means that future compounding will be from a base that is significantly higher than where the shares trade today. It means that there are multiple engines of wealth creation here: growing revenue, multiple expansion and improved margins flowing from operating leverage as cross selling opportunities materialize via the Asseco deal.

You will need to formulate your own opinion on valuation and whether Topicus fits your portfolio at today’s price (do your own math and seek professional advice if required).

Part 2 of this analysis - is all about learning how to value Topicus.

Is Topicus A Good Investment?

The Asseco deal proves Topicus isn’t content running the same playbook forever. They’re evolving from pure programmatic acquirer into something more sophisticated: a flexible, strategic capital allocator capable of executing large-scale partnerships that deliver exposure to new markets and massive scale.

They’ve added a new growth pillar. It’s no longer just “acquire small companies and manage them well.” Now it’s “partner with industry leaders and federate for continental dominance.”

The core discipline remains: buy good businesses, let them run independently, compound cash flows, repeat. But now there’s a second engine: strategic minority stakes in enormous, well-run peers that open up entirely new geographies and markets.

For investors, this is what evolution looks like in a compounder. The thesis gets stronger, not weaker. The core is rock-solid and the new partnership makes the whole greater than the sum of its parts.

Topicus just went from being Constellation’s promising European subsidiary to something potentially much bigger: the architect of a pan-European software federation capable of competing with American tech giants.

That’s not a departure from the strategy. That’s the strategy growing up.

Exceptional high returns on capital, paired with a high reinvestment rate is the essence of long-term wealth creation. What’s not to like?

If you want to explore the quantitative aspects of this business in more detail, including an attempt to answer the difficult question of how best to value it, see Part 2 of this analysis:

James Emanuel

1. When control is achieved (ownership over 50%), full consolidation of the subsidiary’s financials is required, including all assets, liabilities, revenues, and expenses. Adjustments need to be made for earnings reported by Topicus that belong to external minority shareholders and which will not accrue to shareholders of Topicus. This needs to be factored into quantitative analysis. More detail in the valuation section.

2. FCFA2S is not a recognized measure under IFRS, it’s an adjusted metric constructed by the company.