The Vitec Approach

You take care of the bottom line, and we take care of the top line. They must generate cash flow, and the product must last 100 years, not three.

The engineer’s acquirer

Vitec was founded in 1985 by Lars Stenlund and a group of physics researchers at Umeå University. The origin shapes everything that followed. Where Constellation Software emerged from venture capital and investment banking, Vitec emerged from engineering and academia.

Stenlund: “A lean, mean, focused machine! The hardest thing about entrepreneurship is choosing what not to do.”

The company buys vertical market software businesses across the Nordics — church management, real estate, auto dealers, energy trading. Forty-five business units serving twenty-plus verticals. The pattern resembles Constellation, but the philosophy diverges.

Vitec’s 25-year return: 450x including dividends. Roughly 27% annually since IPO.

Kaizen, not Berkshire

Mark Leonard describes Constellation as a Berkshire-style permanent owner: buy good businesses, leave them alone, let compounding work. Vitec takes a different view.

Stenlund: “Vitec is a kaizen story with many small incremental improvements, both in the operational way of developing products and our go-to-market.”

Where Constellation applies cost discipline and minimal investment post-acquisition, Vitec actively helps subsidiaries modernise — transitioning to SaaS, rebuilding architecture, investing in infrastructure. The parent company accepts temporarily lower margins for long-term value.

The trade-off is intentional. Constellation buys at 4-6x EBIT and optimises for cash extraction. Vitec buys at 10x+ EBIT and optimises for growth. Both work. The underlying bet is different.

No bonuses

Stenlund on compensation: “We don’t have bonuses. I’ve never understood why you must have a bonus to go to work. But I strongly support employees becoming shareholders.”

The Swedish approach to management runs through Vitec. Consensus over command. Long-term relationships over transactional deals. Trust that people will do the right thing without variable incentives.

Decentralisation at Vitec means something specific: 99% of decisions happen at the edges. The centre sets culture and allocates capital. Everything else belongs to the operating companies.

Stenlund: “Decentralization is about not meddling too much, which requires a strong culture because 99% of decisions are made in the outermost parts of the organization.”

The culture cannot be copied through policy. It requires decades of consistency. Vitec has had forty years.

Permanent home

Vitec positions itself as a permanent home for founders. The pitch matters in a market where private equity offers higher multiples but three-to-five year horizons.

Stenlund: “You take care of the bottom line, and we take care of the top line. They must generate cash flow, and the product must last 100 years, not three.”

The Nordic market for vertical software remains fragmented. Vitec sees five hundred potential targets, with a hundred on the annual shortlist. Most are too small for private equity, too niche for venture capital, too specialised for strategic buyers.

The founder psychology is specific: someone who built a business over decades, who cares about employees and customers, who wants continuity rather than extraction. Vitec competes for these sellers on terms other than price.

Eighty percent of deals still come through brokers. Constellation sources seventy percent proprietary through years of outbound relationship-building. The difference reflects scale and geography — Vitec remains concentrated in the Nordics, where the market is smaller and relationships matter more.

The contrast

Constellation and Vitec both buy vertical market software. Both hold permanently. Both decentralise. The similarities end there.

Neither approach is superior. Constellation’s discipline on price and capital structure has produced extraordinary returns. Vitec’s willingness to invest and pay up has produced extraordinary returns. The lesson is that the serial acquirer model admits variation.

Stenlund: “When you’re growing faster than 25% to 30% annually, things break a little too much.”

The constraint is not capital or deal flow. It is the ability to maintain culture while scaling. Vitec grows at the pace its operating system can absorb. The engineers who founded it understood that systems have limits.

Connects to Library: Process Power · Switching Costs · Optionality

See also: The Constellation Model — The comparison point: finance DNA, lower multiples, hands-off discipline. The Lifco Way — Swedish peer with similar cultural roots, different sector focus.