bizaro86 Posted August 7, 2015 Share Posted August 7, 2015 It could be an estate freeze. If you think a corporation you own is going to appreciate before your death, common tax planning in Canada is to switch the capital structure of the corporation to be very preferred share heavy. So a $100MM fair-value corp would be restructured into $1MM common and $99MM prefs. Then, the common can be gifted/sold to the future heirs. Then any future gains in value accrues to them, and on death only the value of the prefs is subject to capital gains taxes. If that's the case, that would actually suggest he thinks there is future upside. Link to comment Share on other sites More sharing options...
rb Posted August 7, 2015 Share Posted August 7, 2015 Wow - so this is really starting to sound like a retirement in planning.... Doesn't it seem more likely that this is simply a transfer that has occurred for purposes of estate planning? I don't know the details of the tax code of Canada (I assume Leonard is a Canadian citizen), but something like this doesn't exactly seem like a sale to me. It seems like a likely explanation would be getting the assets out of his taxable estate. It would seem to me that such a transfer, if I am correct, would have no impact on his motivation or incentives. Just a bit of flavour. There are no estate taxes in Canada. The probate tax is fairly low. Also you cannot gift shares tax free. I agree with you that the transaction is a bit fishy and something to do with tax. My feeling is that it has to do with the taxation of the numbered holding company as Canada has very strict laws against holding companies. Link to comment Share on other sites More sharing options...
bizaro86 Posted August 7, 2015 Share Posted August 7, 2015 No estate taxes, but capital gains are payable as death is a deemed disposition. Presumably his cost basis in those shares is low. Link to comment Share on other sites More sharing options...
KCLarkin Posted August 7, 2015 Share Posted August 7, 2015 No estate taxes, but capital gains are payable as death is a deemed disposition. Presumably his cost basis in those shares is low. Yes, cost basis would be zero. But if this is an estate freeze, is there a deemed disposition? Or is there a way to use trusts to avoid deemed disposition? Link to comment Share on other sites More sharing options...
Guest glavacem Posted August 8, 2015 Share Posted August 8, 2015 Glad to see a thread on this one. I was very lucky and bought in three years ago and have never sold a share. Link to comment Share on other sites More sharing options...
bizaro86 Posted August 8, 2015 Share Posted August 8, 2015 The purpose of an estate freeze is to avoid a deemed disposition on death of the future gains, while only realizing a small deemed disposition now. From my example above, if you have a corp worth 100mm, you convert your common to 99 mm face in pref shares plus 1mm in new common. Then give/sell the new common to kids for 1mm, keep pref until death. Effect is capital gains on 1mm now, 99 mm on death, and 0 on any gain in value from now until death. Link to comment Share on other sites More sharing options...
Liberty Posted September 4, 2015 Author Share Posted September 4, 2015 http://www.prnewswire.com/news-releases/zillow-group-announces-sale-of-market-leader-to-the-perseus-division-of-constellation-software-300137912.html Zillow Group (NASDAQ: Z and ZG), which houses a portfolio of the largest and most vibrant real estate and home-related brands on mobile and Web, today announced the pending sale of Market Leader to the Perseus Division of Constellation Software, Inc., an international provider of market-leading software and services, for $23 million USD. The sale is expected to close early in the fourth quarter. This is a business that was acquired by another company in 2013 for $335m... http://techcrunch.com/2013/05/08/trulia-to-buy-market-leader/ Link to comment Share on other sites More sharing options...
giofranchi Posted September 4, 2015 Share Posted September 4, 2015 This is a business that was acquired by another company in 2013 for $335m... Yes! When I read that, it sort of reminded me of the Maxim purchase by Biglari… Except that I like software much better! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
gary17 Posted September 14, 2015 Share Posted September 14, 2015 Does anyone have access to this Article ? http://www.inman.com/2015/09/14/market-leaders-soon-to-be-owner-constellation-software-out-to-dominate-real-estate-software/ I am estimating this business is trading at about 25x next year's earning if it grows 30% Link to comment Share on other sites More sharing options...
no_thanks Posted September 14, 2015 Share Posted September 14, 2015 Googled the title: Takeaways: The Perseus Division of Constellation Software Inc. is poised to become a major real estate software provider with its pending Market Leader acquisition. The company has been in the real estate space for six years; it owns four real estate software firms, including website provider Z57. Perseus’ parent company is a large global software provider best known for its transit software, Volaris. The Perseus Division of Constellation Software Inc., which entered into an agreement to buy Market Leader for $23 million last week, is poised to become a real estate software powerhouse. A few days before, the Toronto-based software giant snapped up another real estate software provider, Zurple, Launched 11 years ago, Perseus is a subsidiary of Constellation Software Inc. and currently serves approximately 3,000 brokerages and 35,000 agents with a rapidly growing portfolio of real estate agent software, which includes mobile and desktop websites, mapping solutions, lead management and voice-response tools. Perseus powers the websites for its two biggest brokerage clients, Howard Hanna Real Estate and Coldwell Banker United, Realtors, under the “Constellation Web Solutions” brand. Real estate brokers and agents hungry for website, customer relationship management and marketing software will soon have a big new provider in Perseus and Constellation. Real estate brokers and agents will soon have a big new software provider in Constellation’s… CLICK TO TWEET The firm’s recent acquisitions extend its goal for real estate software domination, said Perseus’ president, Dexter Salna. The company seems to be deploying a roll up strategy to fuel its growth. Perseus rebranded from “Constellation Homebuilders Systems” last year and owns 34 firms that offer software to companies in eight different industries including paper processing, homebuilding, education and health care. It has grown its homebuilder software into a market leader in 11 years; 40 percent of the nation’s top 200 homebuilders use its software, Salna said. He has similar hopes for Perseus’ real estate division. Dexter Salna Dexter Salna Salna declined to delve into the specifics of Perseus’ Market Leader play, as the acquisition hasn’t closed yet (it’s expected to close early in the fourth quarter). Market Leader — which provides real estate CRM, lead generation and marketing tools to a customer base of over 100,000 agents — has enterprise accounts with the nation’s largest franchisor and largest brokerage: Keller Williams Realty and NRT LLC. Perseus first jumped into the real estate software game with its 2009 purchase of assets for Move Inc.’s real estate website firm, “The Enterprise,” which brought it vendor relationships with MLSs covering approximately 90 percent of the nation’s listings. A year later, it acquired the real estate customer relationship management platform Birdview. In 2013, it bought Z57, which currently powers lead generation websites for 6,500 agents. Although its real estate software holdings are multiplying, Perseus — following its parent company’s model — has no plans to merge them, Salna said. Instead, it will grow them as separate units and support different client bases with different brands, even if there’s some overlap. However, the firms share best practices and other resources, such as the MLS vendor relationships, he said. Constellation Software is an international provider of market-leading software and services to a select number of industries. Its mission is “to acquire, manage and build market-leading software businesses that develop specialized, mission-critical software solutions to address the specific needs of our particular industries.” With its global reach, it has over 30,000 customers operating in over 30 countries, employing 9,200 workers and generating consolidated annual revenues exceeding $1.6 billion. Link to comment Share on other sites More sharing options...
Liberty Posted September 15, 2015 Author Share Posted September 15, 2015 Digging around Sweden, apparently: http://www.prnewswire.com/news-releases/netadmin-systems-acquired-by-volaris-group-527660901.html Link to comment Share on other sites More sharing options...
no_thanks Posted September 15, 2015 Share Posted September 15, 2015 A similar company in Sweden. Interesting. https://www.google.com/finance?q=STO%3AVIT-B&ei=ok34VYLPOYOBmAGxmKLYBg Link to comment Share on other sites More sharing options...
gary17 Posted September 18, 2015 Share Posted September 18, 2015 Considering what the market has been doing; I really can't complain about Constellation ! However, if the market continues to slide more ; to the extent that other 'good companies' become very attractive, I may have to trade in my CSU to go after those value stocks.... Does anyone have an opinion about why CSU has held up well in the market selloff recently and if CSU shareholders in similar situations as me would trigger some price decline ? (I hold very few shares LOL) I like this to be a long term hold; but when sexier ideas come in... it's hard to hold on ..... Gary Link to comment Share on other sites More sharing options...
no_free_lunch Posted September 19, 2015 Share Posted September 19, 2015 CEO has complained in the past that prices for the companies they bid on have worked their way up, which will certainly crimp his ability to grow without debt. So it could actually be to the company's benefit if there is a global recession. I mean look at the period over which the company was built. That being said I think it is very expensive at these levels. Link to comment Share on other sites More sharing options...
gary17 Posted September 19, 2015 Share Posted September 19, 2015 I guess my question is not just related to CSU but just general observation of weather at times like this we should train down the quality For Value Link to comment Share on other sites More sharing options...
no_free_lunch Posted September 19, 2015 Share Posted September 19, 2015 All I know is if things get really ugly it is important to be comfortable with what is in your portfolio. Right now I am usually trying to trade up in the quality chain. Link to comment Share on other sites More sharing options...
Liberty Posted September 30, 2015 Author Share Posted September 30, 2015 http://www.marketwatch.com/story/constellation-software-inc-completes-rights-offering-of-debentures-2015-09-30-17173113 Fresh cash infusion. Link to comment Share on other sites More sharing options...
gary17 Posted October 28, 2015 Share Posted October 28, 2015 Q3 results - Adjusted EPS 4.67$ USD / share - -5% organic growth.... http://www.stockhouse.com/news/press-releases/2015/10/28/constellation-software-inc-announces-results-for-the-third-quarter-ended Link to comment Share on other sites More sharing options...
Liberty Posted October 28, 2015 Author Share Posted October 28, 2015 Q3 results - Adjusted EPS 4.67$ USD / share - -5% organic growth.... http://www.stockhouse.com/news/press-releases/2015/10/28/constellation-software-inc-announces-results-for-the-third-quarter-ended 6% hit from FX on organic growth, so at least they would be positive without that. Not great, but that has always been lumpy, and they have no control over FX. Last Q had -4% organic growth with same 6% FX impact. Margins are up, adjusted net income up 43%. Link to comment Share on other sites More sharing options...
Jurgis Posted October 29, 2015 Share Posted October 29, 2015 http://www.marketwatch.com/story/constellation-software-inc-completes-rights-offering-of-debentures-2015-09-30-17173113 Fresh cash infusion. Never got rights with ADR... Link to comment Share on other sites More sharing options...
giofranchi Posted October 29, 2015 Share Posted October 29, 2015 -5% organic growth.... Let’s see at the end of the year how much organic growth has been in 2015, and let’s wait for Leonard to comment on that result… I agree the last two quarters have not been very satisfactory, but overall growth is still good, and organic growth might fluctuate a lot. I think it is inevitable. Leonard will surely be able to shed more light on organic growth in 2015, and let us know how he sees that trend evolving. Cheers, Gio Link to comment Share on other sites More sharing options...
gary17 Posted November 2, 2015 Share Posted November 2, 2015 does anyone know if the CEO's insider transaction recorded on Sep 30 2015 means he took the debenture himself too ? I don't quite understand what this all means ! Link to comment Share on other sites More sharing options...
gary17 Posted November 3, 2015 Share Posted November 3, 2015 Do shareholders of CSU think acquisition is a key ingredient to CSU's long term success ? if CSU stops acquisition now... how sustainable are its existing software businesses ? It'd be interesting to do an DCF analysis to see what CSU is worth , no future acquisitions, and only organic growth ! Link to comment Share on other sites More sharing options...
Liberty Posted November 3, 2015 Author Share Posted November 3, 2015 Do shareholders of CSU think acquisition is a key ingredient to CSU's long term success ? if CSU stops acquisition now... how sustainable are its existing software businesses ? It'd be interesting to do an DCF analysis to see what CSU is worth , no future acquisitions, and only organic growth ! It would grow significantly slower without M&A. Management doesn't believe in buybacks (doesn't see them as fair to shareholders), and the businesses are capital-light, so there would be fairly little reinvestment opportunities without M&A. They could probably increase organic growth somewhat by funding more of what they call 'initiatives', but they're already focusing a fair amount of organic growth, so I'm not sure how much more they could wring out. The cash would no doubt pile up and they'd probably end up with dividends or special-dividends to get rid of it. That said, I think the businesses are very sustainble without M&A. They just won't grow nearly as fast on their own as the combination of organic + M&A does. The CEO actually wrote about the value of organic growth and M&A in one of his recent letters. If you are interested in the topic, I recommend you try to find it. I'm fairly sure it was from 2-3 years ago, but I don't have them here to check at this time. One company in the space that does very well with organic growth is Tyler Technologies (TYL). Slightly different focus than CSU; I think it might be interesting if it wasn't so expensive, but I haven't yet studied it closely. Link to comment Share on other sites More sharing options...
gary17 Posted November 3, 2015 Share Posted November 3, 2015 Thanks Liberty ! Yes, I saw Tyler from the Q3 call transcript; will study more ! Gary Link to comment Share on other sites More sharing options...
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