Volaris pushes software investment

One of the few listed software companies on the JSE, Adapt IT, has delisted after more than a decade after its takeover by Canada’s Volaris.

Volaris, which specialises in acquiring software businesses, has operations in more than 35 countries and is a wholly owned subsidiary of Canada-listed Constellation, a $45bn (R694bn) technology giant.

Volaris’s Mike Dufton, who was in charge of getting the deal over the line after a long year that saw it eventually beating out a bid from Huge Group, talks to Business Day about Volaris’s investment philosophy, Adapt IT’s place in the portfolio and its plans for tech investment in Africa.

What was the attraction to Adapt IT?

If I think about the Adapt IT situation, what we were looking for when we first started talking with them was a great software company that was run by great people. We certainly are very excited about the fact that we’ve been able to complete this transaction and bring a great business into the fold.

Like us, Adapt IT has a history of acquiring companies in a number of industries. But they have knowledge of the SA and Africa market, which we don’t have, so they’ll take the lead when it comes to expansion moving forward.

One of the uncertainties surrounding Adapt IT’s takeover was whether Volaris would take over the day-today running and strategy. What is the group’s position on this?

We really want to get behind Tiffany Dunsdon and the leadership team. We see Tiffany, really, as the head of Adapt IT, driving the strategy for what we want to do in SA and beyond. Volaris is there to support her with knowledge, capital and insight from our experience, as well as to share knowledge from customers we work with.

We don’t insert our management into the companies. We empower the management that’s in place.

How big is Volaris’s portfolio of software companies?

We’ve done about 140 software acquisitions in the history of the company. Last year in particular was an excellent year for us, in that we did 31 software acquisitions in 12 different countries. We are quite an acquisitive company and, as you know, we’ve already done some very important deals in 2022, the most significant of which would be, of course, the closing of the Adapt IT transaction.

There’s diversity of geographies that we’re doing business in and we are active in all segments. We did quite a few acquisitions in North America, an even larger number in the UK and Europe, and a reasonable number in Asia Pacific.

Is Adapt IT the first foray into SA or the continent for Volaris?

In terms of our presence in SA, we do have a number of companies that are already operating and providing solutions in the market. Through our Trapeze Group, we have gained experience from operating Cape Town’s rapid transit bus network.

What industries or sectors does Volaris invest in?

We have a presence in over 30 different industry segments, or what we call vertical markets, so we’re active in a lot of different industries. One of the key areas we’re interested in is the financial services segment — both on the banking and the insurance sides of the equation. We’re active in asset management and have a large retail business, and also education.

We’re growing in lots of new industry segments as well each year. Some we’ve recently gotten into are: renewable energy, creative industries, even things like software development, so it’s a very diversified group of companies.

Volaris has sometimes been compared to private equity. Does this properly reflect the business model?

We never sell the companies we buy. Our focus is very much long-term ownership and we think that fundamentally changes how we work with the companies that we’ve acquired over the years. We acquire, we strengthen, and then grow the businesses we own.

A lot of times people compare us to private equity. Obviously, as an investment orientated business we share some commonalities with the business [model], but we would argue that our fundamental difference is long-term thinking. Because we think long term and never sell our businesses, we’re more patient in terms of looking for returns.

What is Volaris’s investment philosophy?

We think about the M&A side as a key way to continue to grow our portfolio of software companies, but we are also very concerned about the operational excellence inside the businesses and the talent development of those.

So, when we’re working with any of the businesses, post acquisition, we spend a lot of time talking about operations: how are you running the business today, what are you doing to develop talent, what investments are you making in product and people?

We also share our best practices around what we know from the hundreds of software businesses we’ve acquired.

We’re extremely analytical and highly enumerative, so what that means is we’ll spend a lot of time just researching all of the companies and looking at trends and best practices.