TOI.V · Topicus.com 89.32 CAD -0.18 (-0.20%) 2026-SEP-18 12:48 EST

Topicus is Constellation's European arm, doing the same thing on a smaller base — buying vertical-market software businesses across Europe and holding them permanently. Smaller matters here, because a smaller acquirer has more room left to grow.

It is the second-largest modelled upside in the portfolio: $65.4 against a fair value of $133.5. Earnings are forecast to rise from 3.43 to 5.49 a share by 2028, a 17% annual rate and the second-highest expected return of any holding. There is no dividend — everything is reinvested, which is exactly the point of owning a serial acquirer.

The July acquisition named here, DiffusionData, is a small British company providing real-time data streaming for mobile, web and AI applications. It is worth noting the direction of travel: the AI fear that has taken 26% off the share price this year is the same technology the company is now acquiring infrastructure for.

Topicus buys small European software companies that sell unglamorous, essential systems to niche industries — the software a dentist's practice or a municipal government cannot operate without — and keeps buying more, forever. It is the European offshoot of Constellation Software and runs the same playbook.

It appears in this post only in one sentence, as one of the five companies Slegers and Chuck Akre both own. But it is arguably the purest illustration of Akre's third principle. A compounding machine, in his definition, is a business that can take the cash it earns and put it back to work at a high rate — and a serial acquirer of small software firms has, in effect, an unlimited supply of such opportunities as long as the discipline holds.

No new valuation work is offered here. The information is the corroboration: a manager who holds five names for decades has independently reached the same conclusion.

Topicus was spun out of Constellation Software and does the same thing in Europe: it buys small software companies that serve one specific industry — the systems a dentist, a housing association or a local council runs on — and keeps them forever. The other half of the Judges proceeds goes here: 290 shares at a limit of 102 Canadian dollars.

Judging this kind of company by reported profit is misleading, because accounting rules force it to write off the cost of the software businesses it buys, which makes profits look far smaller than the cash actually generated. So the measure used is the cash genuinely available to shareholders after everything is paid.

On that measure the shares yield 4.2% — meaning you get 4.2 cents of real cash for every dollar of share price, one of the highest levels the company has ever offered, so one of the cheapest it has ever been.

The growth side of the argument is asserted rather than shown here: plenty of small European software companies left to buy, and continued strong growth expected.

Topicus buys small European software companies that serve one specific industry — dentists, housing associations, local government — and then uses the cash they produce to buy more of them. It was spun out of Constellation Software, which invented the model, and it runs the identical playbook in Europe.

The reason for owning the smaller sibling rather than the parent is simple arithmetic. Constellation has become so large that buying a €20 million software company barely registers in its results. For Topicus the same purchase still matters. Being small is the advantage, and Europe's software market is unusually fragmented, so there is a long list of things to buy.

There is also a quieter tailwind: European governments increasingly want data and software kept locally and regulated, which makes local software vendors harder to replace — exactly the businesses Topicus buys.

How it is valued: not on reported profit, which is distorted by the minority partners who co-own many of the subsidiaries, but on the cash actually available to shareholders after everything is paid. That figure grew 23% last year against Constellation's 14%. Assuming 20% growth this year gives €262 million, which at the current share price is a cash yield above 5% — among the cheapest the company has ever been. The purchase: $20,000, 285 shares, at a limit of CAD 97.

Topicus is Constellation's European offspring — spun out of it, run on the same playbook, buying small vertical-market software businesses across Europe and reinvesting every euro of spare cash into buying more of them.

The reason to own it alongside the parent rather than instead of it is arithmetic: Topicus is far smaller, so each acquisition moves the needle more. As Slegers puts it, "the larger you are, the harder it is to grow." He values it identically — free cash flow available to shareholders was €218.7 million in 2025, and assuming 20% growth this year the shares yield 5.1% on that figure, which, as with Constellation, is about the cheapest it has ever been.

Topicus is the European arm of the Constellation model: buy small software companies that run one specific kind of organisation and keep them forever. Over five years its revenue has grown 25.7% a year and its operating profit 20.6% a year, and both have doubled since 2021.

The whole pitch is one sentence: if you had bought in the summer of 2021 your return today would be zero. The business roughly doubled and the share price did not move, which is why the shares now change hands at 26 times expected earnings against a five-year average of 49 — one of the cheapest levels in their history. Two of the three valuation screens agree, and the third (the reverse DCF) still leaves four percentage points of margin between the growth the price assumes and the growth expected.

Topicus is the European offshoot of Constellation Software, and it does the same thing: buy small software companies whose product runs one specific type of organisation — a library, a public transit system, a specialist clinic — and keep them forever.

Investors have marked it down on the theory that AI will make such software easy to replace. The post gives three reasons that is wrong, and they are practical rather than technical. Twenty years of accumulated data and process means switching "feels like moving a mountain." The software encodes local rules a general model does not know — "AI might know the law… but it doesn't know how a small-town court in the Netherlands actually runs day to day." And the annual cost is trivial next to the damage of it failing, so nobody is shopping for a cheaper option. Meanwhile the numbers went the other way from the share price: 2025 revenue rose 20% and the free cash flow available to shareholders rose 23%.

Topicus does in Europe what Constellation does globally, and it was spun out of Constellation to do it: buy small companies that make software for one specific industry, then hold them. That kind of software — "vertical market software" — is different from the broad tools everyone uses like Excel or Slack. Because it is custom-fitted to one trade, customers almost never leave, it can raise prices without losing anyone (the cost is small relative to how essential it is), and 70% of Topicus's revenue arrives as recurring maintenance fees.

Its share price has fallen with the rest of the software sector on AI fears. The reason Slegers is comfortable is the owner: CEO Robin van Poelje and his wife's family hold nearly 31% of the company and describe their horizon in generations rather than years — "Building such a compounder is difficult, it is time consuming. But we have plenty of time." Cheap price plus a genuinely long-term controlling owner is the setup he wants. The row uses the ticker the post itself writes (TOI.V, Toronto Venture); the US over-the-counter line is TOITF.

Topicus does in Europe what its parent Constellation does globally: buy up small software companies serving specific industries — schools, hospitals, local government, financial firms — and hold them forever. It was spun out of Constellation and run on the same playbook.

The valuation argument is the simplest in this issue and needs no model. The share price today is where it was in 2021. In those five years the cash the business throws off has doubled. So you are paying half as much per dollar of cash as you were — "like buying the same house that cost $200,000 five years ago for $100,000 today." The AI worry that caused the derating is the same one applied to Constellation, and Topicus' own answer is quoted approvingly: it is using AI to make its software do work rather than merely record it. He added $15,000 with a limit of CAD 105.

Topicus is Constellation's European offshoot, doing the same thing across Europe — buying niche software businesses and reinvesting everything into buying more.

This entry is where the AI question finally gets a proper answer rather than a denial. Slegers concedes the premise: yes, AI makes writing software cheaper. His point is that writing the software was never the hard part. These products are welded into how a hospital or a council actually operates, so nobody switches; there is no realistic alternative, so prices can rise; and the supplier's real asset is knowing the industry and the people in it well enough to be trusted with something that cannot fail. A machine that writes code faster does not give you any of that.

Meanwhile the company is doing exactly what it should while its shares fall: buying Danish claims software, Polish hospital software, its first Romanian business, and building a 25% stake in Poland's largest IT company. Free cash flow keeps rising. The gap between what the business is doing and what the price says is the whole position.

Topicus appears in this post as the smart money rather than the recommendation. It is a European spin-off of Constellation Software that buys small, industry-specific software companies and runs them on the same disciplined playbook. Its steadily growing stake in Asseco Poland — from 10% to nearly 15% in nine months — is what put Asseco on Slegers' radar in the first place, and the expectation that Topicus will impose its operating discipline is the core of the Asseco case. No valuation or stance is offered on Topicus itself here.

Topicus buys small software companies across Europe whose products run one specific industry — a hospital's records system, a municipality's tax software — and reinvests the cash they produce into buying more of them.

2025 was the paradox this archive keeps returning to: the business had its best year of capital deployment ever, spending more on acquisitions than in the previous three years combined, while the share price went nowhere. The reason is a fear rather than a fact — that artificial intelligence will make it cheap to rebuild this kind of niche software, destroying the pricing power that makes the model work.

Slegers rejects it, and the interesting evidence is that the fear was serious enough for the parent company, Constellation Software, to hold a call devoted to answering it. His own answer arrives two weeks later in the portfolio update: writing the code was never the hard part — knowing the industry, and being the supplier a hospital or a council will actually let near its operations, is.