Public serial acquirers like Constellation Software exploit a valuation arbitrage. They buy private niche businesses at low multiples (e.g., 5x EBITDA) which are then automatically revalued at the parent company's much higher public market multiple (e.g., 28x EBITDA), creating significant shareholder value on day one.

A specific arbitrage opportunity exists with serial acquirers. When they announce a deal that will significantly increase future earnings per share, the market often under-reacts. An investor can buy shares at a compressed forward multiple before the full impact of the acquisition is priced in.

The firm's playbook involves an immediate, one-time cost reduction at closing to establish a baseline of profitability. This allows them to shift the company's valuation from a revenue multiple to a more stable EBITDA multiple, creating value without disrupting long-term growth initiatives and shocking employees later.

Acquiring smaller companies at a 5-6x EBITDA multiple and integrating them to reach a larger scale allows you to sell the combined entity at a 10-12x multiple. This multiple expansion is a powerful, often overlooked financial driver of M&A strategies, creating value almost overnight.

Progress successfully acquired Chef over PE bidders by modeling cost synergies unique to its platform, such as shifting development to its Bangalore center and sales to an inside sales motion. PE, treating it as a standalone, couldn't match these savings.

Many M&A teams focus solely on closing the deal, a critical execution task. The best acquirers succeed by designing a parallel process where integration planning and value creation strategies are developed simultaneously with due diligence, ensuring post-close success.

Progress builds its pre-LOI synergy models by focusing on high-conviction cost optimizations it can control, such as leveraging global centers of excellence and consolidating sales/back-office functions. Revenue synergies are treated as upside, not core to the valuation.

The current M&A landscape is defined by a valuation disparity where smaller companies trade at a discount to larger ones. This creates a clear strategic incentive for large corporations to drive growth by acquiring smaller, more affordable competitors.

Viewing acquisitions as "consolidations" rather than "roll-ups" shifts focus from simply aggregating EBITDA to strategically integrating culture and operations. This builds a cohesive company that drives incremental organic growth—the true source of value—rather than just relying on multiple arbitrage from increased scale.