A unit has co-led a US$150-million equity investment into Valsoft Corp., a rapidly growing Montreal-based software rollup play that is aiming to emulate the success of acquisition machine Constellation Software Inc. Portage Capital Solutions, a growth equity arm within Power’s Sagard alternative asset-management business, is co-leading the deal with past backer Viking Global Investors, a U.S. fund-management giant, and Toronto-based Propelr Growth.
All of the money is going to Valsoft, unlike many recent large tech financings that have largely been used to buy out investors and employees. The deal values Valsoft at more than US$2-billion. Valsoft is one of several companies, including Toronto-managed Banyan Software, that have sought to emulate Constellation’s strategy by buying up small, modestly growing software companies that focus on specific customer niches such as hotels, and face little to no competition or customer churn. Valsoft has amassed 107 companies, which collectively employ more than 3,500 people, generate more than US$550-million in revenue and US$125-million-plus in operating earnings. Like Constellation, it has split itself into multiple divisions that each pursue their own acquisitions. The company, which has 60 mergers and acquisitions dealmakers, typically buys small companies with less than US$10-million in revenue. It aims to pay one to two times revenues, although competition for deals has been heating up as flush private-equity firms look to deploy capital. Valsoft then works to expand its acquired companies’ revenues and profits by adding heft to their sales efforts. Like Toronto-based Constellation, Valsoft’s goal is to buy and hold, although it has divested two companies to date. Valsoft sold a minority stake to Viking in 2022 for US$150-million and this year raised US$170-million in debt from Viking and Coatue Management LLC to fund deals