Record high acquisition pace in 2021

The pace of acquisitions by our portfolio companies in REQ Global Compounders was high in 2021. In total, 316 small private deals were completed by the companies we own during the year.

The pandemic has provided a significant increase in deal flow. There are many reasons why we are seeing the increase in deal flow. Some of the companies we talk to point to the fact that many private companies usually come up for sale after or during crises. When you are a business owner going through a crisis, you are often more willing to sell your business, or at least a significant portion of it. Because our portfolio companies have spent years building relationships with private sellers, we observe that our companies are in a great position when assets are up for sale.

The average transaction size represents approximately 1.4% of consolidated revenue. Acquisitions are generally high-margin, growth-oriented private companies that continue to be run by existing management with part ownership.

The most active acquirer of the year was Constellation Software, which made 74 acquisitions of vertical market software companies during the year. We are not surprised by the sharp increase in deal flow at Constellation Software. The company announced a few years ago that it would significantly increase the number of people working on acquisitions. What we are seeing today is the impact of steps the company took a few years ago.

We continue to expect strong deal flow through 2022, with acquisitions providing strong double bottom-line profitable growth for our businesses, ultimately leading to strong returns for our investors.