$100M CSU block doesn't feed the ducks

Love it when a plan comes together. Sort of.

The ownership transition has finally begun at Constellation Software (CSU:TSX), with a $100 million block trade deftly completed by TD Securities last Friday. My market buddies believe the 1.1729 million CSU shares came solely from Birch Hill Private Equity Partners, which manages a 20% CSU ownership stake position on behalf of TD Bank’s former Private Equity division. It wasn’t the fee party that would have resulted from the potential $600 million bought deal that I yakked about last month (see prior post “Make your 2012 fee budget — bid CSU” Jan 17-12). A simple block trade won’t “feed the ducks” (as Ross used to say) who have been loyally publishing on the name for years, but it sure reduces the friction cost. Despite the fact that TD’s 19.7% ownership stake had all the appearances of a control block, it seems that you can sell “just” 1.17 million shares of a 3.44 million position and avoid the need for a full prospectus. My memory is faint on this, but perhaps being below 20% gives you lots of wiggle room, even if you’ve got two board seats. That’s why the top securities lawyers earn what they do.

As an investment, CSU has been such a winner for everyone concerned. Private equity investors, management, the buyers of its $17/share $80 million IPO in 2006; the entire lot of them. Proof that you can invest in a Canadian technology company, take it public, grow the beast, leak shares at $84 and make a mint.

Why don’t more folks, from investors to i-bankers to entrepreneurs, try to emulate this type of success? If only Mark Leonard could be cloned!

MRM