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Constellation Software has become one of Canada’s biggest publicly traded technology companies by playing the acquisition game a very different way than most. Rather than seeking large deals that transform the company, chief executive officer Mark Leonard has built a business by constantly buying small software companies for a few million dollars apiece. (Frank Gunn/THE CANADIAN PRESS)
Constellation Software has become one of Canada’s biggest publicly traded technology companies by playing the acquisition game a very different way than most. Rather than seeking large deals that transform the company, chief executive officer Mark Leonard has built a business by constantly buying small software companies for a few million dollars apiece. (Frank Gunn/THE CANADIAN PRESS)

Constellation Software's elusive CEO Add to ...

In this age of zero privacy, Mark Leonard has managed to maintain a practically unthinkable level of anonymity for just about any individual—let alone an IT executive who runs one of Canada’s most dynamic, fastest-growing and most acquisitive software companies, and who has been compared favourably with Warren Buffett and Prem Watsa. So it’s no surprise that Leonard would probably prefer not to be the subject of a profile in this magazine. For that matter, he would prefer not to be the subject of a profile in any magazine. Or newspaper. Or trade publication. Or television show (you know, if there were a television show devoted to profiling Canadian business leaders). No, the founder, president and chairman of Constellation Software Inc.—a Toronto-based, publicly traded software company with a $5-billion-plus market cap and one of the best-performing stocks on the TSX—would prefer not to be profiled at all. And so far, in the nearly 20-year history of Constellation, he’s done a pretty good job of staying out of the spotlight.

In fact, you could say he’s done a strangely effective job of it. Search “Mark Leonard” on Google Images and you get nowhere. Scan the Web, or even the company’s website, for basic biographical information and you’ll find, well, not much. One source from England, where Leonard sits on corporate boards, says that he was born in 1956. A person close to Constellation says he was born in the United Kingdom; another seems to think he comes from South Africa, but “I really can’t remember.” The company’s online bio-graphy (no photo) notes that “Mr. Leonard founded CSI in 1995,” and before that worked in “the venture capital business for eleven years”; it also records that he has a BSc from the University of Guelph and “a MBA” from Western University. And that’s about it. Social media? Well, he’s on LinkedIn (no photo, of course), which duly notes his job title and that he attended Western’s Ivey Business School from 1980 to 1982. At the time of this writing, he had 311 LinkedIn connections—so somebody knows him. And what do those people have to say? “He is probably the most intensely private individual in IT,” says one long-time associate who, like nearly everybody else contacted for this article, spoke on condition of anonymity. “He’s one of the smartest tech executives I’ve met in my entire career.”

And there’s an irony in that. Because if anyone is deserving of whatever celebrity the business pages can bestow on a Canadian corporate leader, then Leonard is probably the guy.

With an initial $25-million investment from OMERS and his old associates at Ventures West Capital in 1995, he has built Constellation into a world-leading consolidator of vertical market software (VMS) companies—firms that create products to help run businesses in specific industries. Over the years, Constellation has made scores of acquisitions and, through its six operating groups, now provides software to over 60 industries, from health care to law to public transit. For instance, Markham, Ontario-based Jonas Club Management makes the programs that run golf courses’ payroll, tee-time reservations and food-and-beverage operations. Emphasys makes software for various public housing authorities. Constellation’s customers need the kind of stuff that’s too specialized to merit much attention from the big guns of enterprise software, and all these VMS firms under its umbrella give Constellation a strong competitive position in the North American marketplace—that is, there isn’t much competition at all.

Typically, Constellation’s acquisitions are small—in the $2-million to $4-million range—but add them all up, slip in a dose of Constellation’s financial and oper-ational discipline, and you have a company with $1.2 billion (U.S.) in sales in 2013 and an EBITDA margin of 20%. A tidy proxy for Leonard’s accomplishment lies in the company’s stock performance: From its initial public offering in 2006 to the end of the first quarter of this year, CSI returned more than 1,300%. Add in dividends and that number soars to 1,535%. That’s equivalent to a compound annual return of almost 43%.

Those kinds of results tend to get you noticed, like it or not. And now more than ever, the focus on Constellation and its enigmatic president is only likely to grow more intense. Two decades after its founding and eight years on from its IPO, Leonard’s company has had a great run. At the end of the first quarter, the stock was trading at just under $270—double its price a year ago. Last year was one of the most acquisitive in its history: 30 acquisitions, including two uncharacteristically large fish. In June, through its subsidiary N. Harris Computer Corp., Constellation acquired Virginia-based health-care IT company QuadraMed Corp. for roughly $77 million (U.S.) in cash. Then, in December, Constellation bought Total Specific Solutions (TSS), kind of the Dutch version of Constellation Software, for ¤248 million (about $360 million at the time). For a company that traditionally makes 10 or 20 acquisitions a year for up to $4 million a pop, that’s plenty of fish to swallow.

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