Serial Acquirers In My Portfolio

Small But Mighty Long-Term Compounders

Nearly four years ago, I became fascinated with the concept of serial acquirers or acquisition compounders. In a prior post I highlighted Constellation Software, you could make the case that Constellation is one of the best serial acquirers ever. These are essentially decentralized conglomerates that grow through a steady stream of acquisitions, often micro-acquisitions. What’s interesting about them is that they view themselves not as operators or managers but as capital allocators and investors.

One earliest and most renowned example is Teledyne, run by Henry Singleton. As highlighted in one of my favorite books “The Outsiders” by William Thorndike, Singleton focused on efficient capital deployment rather than operations management. “CEOs need to do two things well to be successful: run their operations efficiently and deploy the cash generated by those operations. Most CEOs concentrate on managing operations. Singleton, in contrast, gave most of his attention to the latter task."

At their core, serial acquirers embrace decentralization. Unlike traditional conglomerates, they avoid integrating acquired companies, instead allowing subsidiaries to operate autonomously much like a hands-off private equity or venture capital firm would. Yet they take a more committed "buy and hold" approach, rarely divesting assets.

Their acquisition criteria aren't driven by hype but by identifying companies that can strengthen the core business and increase free cash flow (FCF). However, not all target cashflow-positive businesses - the model can work well for venture studios acquiring promising startups before they reach profitability. The key is de-risking the process by acquiring proven companies rather than building everything from scratch.

Some of the most active serial acquirers are lean holding companies based in the Nordic regions and Canada. Many are now publicly listed but operate with small teams, scooping up niche SMEs valued between $1 and $5 million. Their playbook of buying for FCF and never selling echoes Berkshire Hathaway's early days as an acquirer of small businesses. It's an unconventional conglomerate model ideally suited for regions with aging SMEs lacking succession plans—for instance, Italy has 3.7 million small businesses despite a population of only 59 million.

Here are a couple serial acquirers that I own in my portfolio:

Lumine Group (CA:LMN) trades on the Canadian TSX exchange and was spun out of Constellation Software in 2021. Mark Leonard is the poster child for running a successful serial acquirer. Constellation, as many know, focuses on acquiring VMS (Vertical Market Solutions) businesses across a wide range of industries. The recent spin out of Lumine led by David Nyland will focus on acquiring VMS businesses specifically in the media & communications industry. When Constellation acquired Wide Orbit in 2022 they saw immense potential to grow in the media & communications industry, sparking the spin-out of Lumine. Lumine uses many of the same operational structures as its parent company Constellation when acquiring companies in their industry. Additionally, Constellation still owns ~61% of the new venture and has a vested interest in Lumine’s future success.

Teqnion (SE:TEQ) trades on the Stockholm International Exchange and is one of the fastest growing Swedish serial acquirers. Founded in 2006, they run a decentralized business model and specialize in profitable niche companies, currently Swedish and UK based, operating in a wide range of industries. Teqnion's strategy is based on active ownership, optimization of subsidiaries' operations, and growth through acquisitions. The types of businesses that Teqnion owns are far too many to list, but here are some: selling instruments and consumables for clinical laboratories, folding electric wheelchairs, surge protection/lightning protection, hydraulic components. In addition, the company produces customer-specific building components and specializes in contract manufacturing business. Currently, Teqnion’s stock price is experiencing a bit of a downturn representing a great entry point for new investors.

One of the positives of investing in small-cap Swedish companies is shareholder access to the leadership team. Johan Steene, current CEO, was nice enough to respond to an email that I sent in mid 2024 related to the downturn in which he stated: “We need to have the stamina to want to be our best even when things go smoothly, so we are resilient and stay ahead of our competitors when times are tough. Like now.”

Topicus (CA: TOI) like Lumine, trades on the Canadian TSX exchange. Also like Lumine, Topicus is an off shoot of parent company Constellation Software. Topicus’s strategy is to run a decentralized serial acquirer with similar operating structures as Constellation, but to operate solely in Europe. Meaning they can acquire VMS businesses across multiple industries, unlike Lumine, as long as they are operating in Europe. Recently, Topicus and Constellation just announced Topicus’s largest acquisition to date of Cipal Schaubroeck. Cipal Schaubroeck NV (“CP”) is a Belgium-based vertical market software provider active in the local government vertical with annual gross revenues of approximately €110M.

Transdigm (TDG) is an aerospace company that designs, manufactures, and supplies parts for commercial and military aircraft. Their products are used in aircraft passenger seats, cockpit security systems, parachutes, and more. TDG has one of the biggest competitive moats out of any company I have researched. Nick Howley was also highlighted in “The Outsiders” by William Thorndike as an exemplary CEO. Nick and his team have acquired over 90 businesses, focusing on components critical to aircraft safety and functionality that make up the company. Transdigm maintains exceptionally high operating margins of 40-50% by optimizing acquired companies for profitability, often through cost-cutting and price increases.

Computer Modelling Group (CA:CMG) is a software company that produces reservoir simulation software for the oil and gas industry. It is based in Calgary, Alberta, Canada with branch offices in Houston, Dubai, Bogota, Rio de Janeiro, London and Kuala Lumpur. The company is traded on the Toronto Stock Exchange under the symbol CMG.

If you haven’t already noticed a theme, CMG also has ties to Constellation Software. Mark Miller (COO at CSU) is chairman of the board, and the largest shareholder of CMG is a Constellation board member. Additionally, the head of acquisitions for the company is ex-CSU and they plan on implementing many of the same strategies for the VMS industry within the climate space. This is the newest serial acquirer addition to my portfolio in 2025, the stock recently took a downturn and became more attractive trading at the $10 (CAD) level over the last couple of months.

Similar to TDG, Heico supplies components for aerospace, aviation, industrial, electronic, and military applications. The company generates approximately $3.8 billion in annual sales, split roughly 2-to-1 between its two business units: flight support and electronic technologies.

The industrial components space is highly fragmented. Many small companies supply parts and components to various end markets. Heico snatches these companies up when an opportunity arises, expanding their product offerings. It's been a big driver of the company's long-term growth. Heico has acquired nearly three dozen companies since 1999.

Choosing which serial acquirer to invest in for me comes down to the management team’s effectiveness and understanding of allocating capital in a way that is accretive to shareholder value. There are many companies that do not do a good job of acquiring companies and many more that inevitably lose money on all the deals they do. The companies laid out above, I believe, have mastered the art of accretive acquisitions and I plan to hold these names in my portfolio for decades.