James Emanuel of Rock & Turner presented his in-depth investment thesis on Topicus (Canada: TOI) at European Investing Summit 2025.
Thesis Summary
Topicus is a 2021 spin-off from Constellation Software (CSU) executing a programmatic acquirer playbook focused on the European market. James describes this “Acquisition-as-a-Business” (AaaB) model as one that uses permanent capital to acquire and indefinitely hold niche vertical market software (VMS) companies. This strategy differs from private equity or serial roll-ups by emphasizing extreme decentralization, which avoids integration risk and allows acquired businesses to run autonomously. James notes this decentralized approach builds portfolio diversification and “anti-fragility” while operating like an active fund without the associated 2-and-20 fees.
The company’s primary competitive advantage, according to James, is its disciplined, in-house M&A process inherited from CSU. Topicus leverages a proprietary Salesforce database of ~100,000 potential targets, where business managers with software backgrounds—not finance professionals—nurture relationships, often for years. This patient approach generates a proprietary deal flow (at a 0.13% annual conversion rate) that allows the company to avoid competitive auctions and brokers. James argues the European market offers a vast runway of private companies, often at lower multiples than in North America, while high barriers to entry like language, culture, and regulation deter competition.
James highlights Topicus’s superior financial characteristics, including the negative working capital profile afforded by upfront software subscriptions, which provides free financing for operations and acquisitions. He also contrasts its disciplined accounting—allocating <20% of purchase price to goodwill—with other acquirers who may use high goodwill allocations to engineer earnings. Topicus provides transparent shareholder reporting through its “Free Cash Flow Available to Shareholders” (FCFA2S) metric, which clearly breaks out the non-controlling interest (NCI) share. The company maintains management continuity, as it is led by Robin van Poelje, who founded the core TSS business in 2006.
James observes that the pace of capital deployment has accelerated, with over €700 million deployed in 2025 alone, nearly matching the €790 million total from the 2021-2024 period. This was driven by the strategic ~€500 million “marriage” with Asseco, a Polish “Topicus twin,” which opens up Eastern European markets. James notes the shares recently experienced a 25% drawdown, which he attributes to group-level noise at CSU rather than fundamental issues at Topicus. He argues Topicus may screen as more expensive than it is, as the benefits from 2025’s heavy M&A investments have yet to flow through, while the costs hit financials immediately. Furthermore, the FCFA2S ratio is steadily increasing as the NCI share declines, which should increase the NPV of future cash flows.
Disclaimer
European Investing Summit 2025 was held from October 28 to November 3, 2025. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
Slides
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