Why did Constellation Software almost never issue shares, and Teledyne issue many?

Did Constellation Software and Teledyne really take opposite paths?

In outline, yes, but they were different companies in different eras. Constellation Software is a Toronto-listed buyer of vertical-market software businesses. Teledyne here means the conglomerate as Henry Singleton ran it from the 1960s into the 1980s. This article does not discuss today's Teledyne Technologies. Each followed the same logic: spend shares when they are expensive, and avoid them when they are not.

What do Constellation's filings show about issuing shares?

• Its Constellation Software Q1 2025 press release says the number of shares outstanding did not change in the quarter ended March 31, 2025.
• Its Constellation Software Q4 2025 press release shows capital stock of $99 million at both December 31, 2024 and December 31, 2025, with no change in the 2025 equity statement. Per-share figures in the release imply about 21.2 million diluted shares. That count is my calculation from the release, not a reported figure.
• Acquisitions in 2025 had total consideration of $1,579 million, including holdbacks and contingent consideration. The cash flow statement shows $1,227 million paid for acquisition of businesses.
• Cash flows from operations were $2,732 million, so cash paid for acquisitions was about 1,227 / 2,732 = 45 percent of operating cash flow.
• The company states that its objective is to invest all of its free cash flow available to shareholders in acquisitions that meet its hurdle rate ( Constellation Software Q4 2025 release page).

The pattern is that Constellation pays from cash it earns. I read two quarters and one year of releases. I did not review every year of its history, so this article does not claim it has never issued shares.

What did Teledyne do?

No Teledyne filing from the 1960s was available to me. The account below comes from Fortune (Carol Loomis, April 29, 1985), written at the time, and from an interview with William Thorndike, author of The Outsiders, which is a secondary source.

• Fortune reports that Singleton used Teledyne stock as currency when the company was a 1960s high-flier, issuing large blocks of shares to buy companies.
• Thorndike reports that Singleton bought about 130 companies, all but two in stock deals, while Teledyne stock averaged a P/E above 20 and the businesses were bought at around 12 times earnings.
• Fortune reports that when Teledyne's P/E fell, Singleton switched to buying back shares. The first buyback was in 1972 at a split-adjusted $8 a share, and the last at $200 in May 1984.
• Fortune reports that by 1985 Teledyne had repurchased 85 percent of its shares for about $2.7 billion.

I treat these as reported accounts, not audited history.

Why would one avoid shares and the other issue them?

Three differences explain most of it.

• Price of the shares. Teledyne's stock was reported to trade at a higher multiple than the businesses it bought. That made shares cheap to spend. When the multiple fell, the same shares became costly, and Teledyne turned to buying them back.
• Source of cash. Constellation's operating cash flow is large enough to fund its deals. A buyer with that flow does not need to sell a piece of itself.
• Standard for issuing. Berkshire's Berkshire Hathaway 1983 shareholder letter says it will issue stock only when it receives as much value as it gives. The same test, applied to different facts, would produce both patterns.

What does a per-dollar view show?

Assumption. A target is bought at 10 times its earnings, so each $1 of target earnings costs $10 of stock.

• If your stock trades at 40 times earnings, $10 of stock is 10 / 40 = $0.25 of your earnings given up per $1 of earnings bought.
• If your stock trades at 8 times earnings, $10 of stock is 10 / 8 = $1.25 of your earnings given up per $1 bought.

At 40 times you give up a quarter of a dollar to get a dollar. At 8 times you give up more than you get. That is the whole case for issuing at one time and not at the other. See what share price or P/E makes stock a sensible currency for the full table.

What should a small public holding company take from this?

Do not copy the instruction to avoid shares. A small holding company usually lacks the cash flow Constellation has, and sellers often like stock. Copy the test: issue shares only when you receive as much value as you give, and say why. My view is that a plan to issue shares in every deal regardless of price is the weak spot. See the Constellation Software model.

Where these numbers come from: Constellation figures are from its Constellation Software Q1 2025 press release, its Constellation Software Q4 2025 press release and the Constellation Software Q4 2025 release page. Teledyne is reported by Fortune (Carol Loomis, April 29, 1985) and an interview with William Thorndike, author of The Outsiders(secondary sources). The principle quoted is from the Berkshire Hathaway 1983 shareholder letter. The 10x purchase multiple and the 40x and 8x stock multiples are assumptions.

Related questions

Does Constellation ever use shares for any deal?

I did not find an equity issuance in the 2025 releases. I did not review earlier years, so I make no claim about them.

Does this describe today's Teledyne Technologies?

No. This article covers only Teledyne in the Singleton years, as Fortune described it in 1985. It makes no claim about today's Teledyne Technologies.

Can a small holding company copy the buyback side?

Only if it has spare cash and a stock priced below its value. Most small holding companies are better placed to use shares than to retire them.

What comes next

For a closer look at one of these companies, see the Teledyne and Singleton case study.

Related articles

• Teledyne: stock as currency, then buybacks
• Constellation Software: the template
• What is the "Constellation Software model," and can it work outside software?
• What share price or P/E makes stock a sensible currency?
• What is a serial acquirer, and how is it different from a roll-up?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.