Mark Leonard Is Gone. The Cathedral Still Stands.
Constellation just hit its cheapest valuation in years.
21,191,530.
That is how many shares of Constellation Software exist as of May 2026.
That is how many existed in 2015.
That is how many existed in 2010.
That is how many existed in 2006, on the day of the IPO.
Twenty years. Not a single new share.
In that time, the company grew from a billion dollar market cap to 51 billion CAD. Free cash flow is up 26 fold. The stock price is up 130 fold.
All per share. All clean. Because the share count never moved.
Mark made the only real mistake of his career.
Constellation did not need money. They had healthy cash flow and a clear runway. But Mark wanted to diversify the investor base. He agreed to a secondary share issuance. The dilution was permanent. He has called that issuance one of the biggest mistakes of his life. He estimated it cost shareholders billions over the decades.
Since that day, Constellation has not issued a single new share. Sit with that.
Twenty seven years. Hundreds of acquisitions. More than sixteen billion dollars deployed. More than sixty four thousand employees. Six operating groups. Over one thousand acquired businesses. All financed from operating cash flow and modest debt.
Not a single share issued as a weapon.
Other software CEOs would say it is impossible. Mark says everything else is unacceptable.
Constellation buys between 80 and 130 companies per year.
Most cost less than ten million dollars. They pay one or two times revenue. They target IRRs of 25 to 30 percent on small deals.
How is this possible at this scale?
They have a database of 50 thousand VMS firms they track. Not 50. Fifty thousand. They have dozens of people across their hierarchy authorized to buy companies. Each of them has spent years learning Mark Leonard’s discipline.
When somebody offers private equity a VMS firm with 30 percent EBITDA margins and stable growth, private equity probably wins. They can lever it, model a higher exit multiple, accept a lower IRR.
When somebody offers Constellation that same firm but in chaos, Constellation wins. Because they are the only ones who know how fast it can be fixed. Because they have data from a thousand similar fixes. Constellation does not buy champions. Constellation buys companies that will become champions. Under their hands.
That is the difference nobody copies. Because nobody has twenty five years of data and a decentralized machine of dozens of people trained to use it.
Now we get to the part that hurts most managers. Constellation pays no stock based compensation.
Not one RSU.
Everything is paid in cash. Then 75 percent of the after tax bonus, for executives, must go into buying Constellation shares on the open market. Those shares sit in escrow for an average of four years. For non employee board members, all after tax compensation must go into shares. No exceptions.
Mark himself has taken nothing since 2015. No salary, no bonus, no travel reimbursement. He pays for his own flights out of his own pocket. He has said he refuses to free load on Constellation shareholders.
He and his family hold around 7 percent of the company. That is it. That is his compensation.
Think about the effect of this. Every executive is a shareholder. Every board member is a shareholder. Everyone thinks in twenty years because their shares are in escrow. Nobody dilutes anybody.
A typical SaaS firm issues 15 to 20 percent of its shares in SBC every year. The founder knows he will not be there in five years. Nobody is aligned with anybody. Michael Burry pointed out that much of Big Tech profit comes from stock based compensation. Companies pay employees with shares instead of cash. The cost shows up as dilution, not as a real cash expense.
So earnings look strong. Over the last 10 years, the Nasdaq is showing 42 percent more profit than actually exists. But the share count keeps rising. Alpha, Warrior and Transocean all use share based compensation too. That is how most of the industry operates.
Constellation is the diametric opposite.
Now the part that troubles my kind of investor most. Constellation has never bought back a single share.
Never.
Mark refuses for two reasons. The first is practical. The shares rarely trade below intrinsic value, so buying makes no sense.
The second is moral. Mark asked outside lawyers about the ethics of buybacks as a public CEO. They told him officers and directors cannot legally repurchase shares while in possession of material non public information. And Constellation guards its acquisition trade secrets like proprietary treasure. Their entire edge depends on those secrets.
But Mark’s real reason runs deeper than legal advice. A buyback is a transaction in which management and the board, who know more than the sellers, buy as cheaply as possible. The bigger the discount you take for yourself, the more those who sell to you get hurt. Mark sees selling shareholders as the same partners as the ones who hold. He refuses to rob them.
The first time I read this, I had to pause.
My entire job is built around companies that recognize their stock is undervalued and act on it. The whole portfolio teaches me that buybacks are a mechanism for transferring value from the weak to the strong.
Mark Leonard says that is not fair. Mark took the second road. And he won.
The stock price explodes. Mark thinks it is too expensive.
Another CEO would stay quiet, smile at conferences, sell some of his own stock, and disappear to the Maldives. Mark issues a public document. He discloses that his personal investment plan is structured to automatically sell shares above his estimate of intrinsic value and buy them below. He sends a signal to the market not to buy at premium prices.
The market ignores him. The price keeps rising.
Same year, they pay a special dividend. They try to calm the euphoria. To tell investors Constellation is not a miracle without limits, that there is a ceiling.
The market still ignores.
Sit with this idea once more. A capitalist publicly begging the market to stop buying him. There is not a single other case I can name. Not Buffett. Not Munger. None.
That is not market behavior. That is religious behavior. Mark Leonard is not a CEO. He is a steward.
September 25, 2025.
The press release was three paragraphs long.
Mark Leonard resigned as president of Constellation Software for health reasons. Effective immediately. Mark Miller, who joined the company in 2001 and had been chief operating officer, was appointed his successor. Leonard would remain on the board.
That was it. No farewell tour. No final letter. No biographical reflection. The same dry tone of every other Constellation announcement.
In the week that followed the stock dropped 17 percent.
Constellation, the most disciplined compounder of our era, lost roughly 14 billion CAD of market cap because one man stopped showing up. The market voted. The market is afraid. The market is asking the question every reader of this essay should be asking.
Was Constellation a system, or was it Mark Leonard?
In its first twenty five years Constellation deployed about six billion dollars in acquisitions. Free cash flow today is 2.66 billion dollars per year. For Constellation to reinvest all of its free cash flow at the same hurdle rates, the next three years require deploying more capital than the first twenty five combined.
Read that again, slowly.
This was already Mark’s problem. It is now Mark Miller’s problem. And it landed on his desk on day one. A study Mark’s team did on twelve high performance conglomerates showed the same trajectory for all of them. High ROIC in their early years. Mean reversion as they scale. Nobody escaped gravity.
Constellation is on the same path. ROICs are already lower than they were five years ago. The decline is not a question of whether. It is already underway.
What was Mark doing about it before he left?
Lowering the hurdle rate but only on large acquisitions. Small deals still target 25 to 30 percent IRR. Big deals can drop to 17 or 20 percent. Experimenting outside the VMS world. At the 2022 shareholder meeting he revealed he had come close to buying a thermal oil business for a billion dollars. The sector could not get financing. Prices were depressed. There were tax advantages and a clever structure. In the end it did not happen.
Do you understand the weight of that one sentence?
The most disciplined software investor of the 21st century considered buying an oil field.
That evolution is now Mark Miller’s inheritance. He is taking over a company that has already accepted it must change. He must execute the change. The first non VMS deal, when it comes, will be the most scrutinized acquisition in Constellation’s history.
If he gets it right, a new decade of compounding opens up. If he fails, Constellation becomes a slow capital returner instead of a compounder.
What am I doing with this?
Constellation trades around 2440 CAD today. After the Leonard resignation news the stock stayed depressed. AI fears compound the pressure. Market cap is 51 billion CAD. At 38 billion USD with 2.66 billion USD of free cash flow, the multiple is 14.3 times cash flow.
That is the cheapest Constellation has been on a free cash flow basis.
A compounder growing 15 percent per year, with 20 percent ROIC, with a thirty year culture of discipline, at 14 times cash flow.
The market is pricing in two risks. Mark Miller might fail to maintain the standard. AI might erode the moat across the portfolio.
I think both risks are overstated, and the second is already priced.
But for my portfolio. Met coal and offshore drilling positions still offer more return per dollar of risk. Constellation will not 5x in three years. But under Miller, if the discipline holds, it will deliver 12 to 15 percent per year for the next decade. Possibly more if the first non VMS deal is well placed. Right now, with Leonard gone and the market in fear, the entry point is more attractive than it has been in a long time.
Compounding is not a strategy. Compounding is not math. Compounding is faith. Faith in discipline, faith in long horizons, faith in your own intelligence against the fog of the market.
Mark Leonard believed. Constellation Software was his cathedral. Now the cathedral has a new caretaker.
The walls Mark built are still standing. The data library still lives in the operating groups. The hurdle rates are still magnetic. The escrow accounts still hold the shares of men who must think in decades.
Whether the cathedral grows or merely stands depends on what comes next.
I am watching. So is the market. So, presumably, is Mark Leonard, from wherever he is recovering, with the same patience he taught everyone around him.
Cheers, Sandro