The Compounder That Doesn't Compound Anything You've Heard Of
In the summer of 2022, Neil Hunn — the quiet, analytical CEO of a company most people on Wall Street could not describe in a single sentence — sat across from a group of investors and explained why Roper Technologies had just paid $5.4 billion for a software business that helps insurance companies manage policy administration. The business was called Frontline Education. Actually, no — it was Vertafore. The name didn't matter, which was precisely the point. What mattered was the arithmetic: Vertafore generated roughly $700 million in annual revenue, grew at mid-to-high single digits organically, converted the vast majority of that into free cash flow, and operated in a market — insurance distribution technology — where switching costs were not merely high but functionally prohibitive. Agents who built their entire book of business on Vertafore's rating, management, and compliance systems did not wake up one Tuesday and migrate to a competitor. The cost of ripping out the plumbing exceeded the cost of any conceivable displeasure. Hunn knew this. He had spent his entire career learning to identify exactly this kind of business — the kind that sits invisibly inside a customer's workflow, bills on a recurring basis, demands almost no capital to maintain, and generates cash flows so stable they resemble annuities more than earnings.
This is the essential fact about Roper Technologies, a company with a $60 billion market capitalization that manufactures almost nothing, employs a radically decentralized operating model, and has compounded shareholder value at roughly 18% annually for over two decades by doing something that sounds simple and is ferociously difficult: buying niche vertical software businesses, leaving them alone, and harvesting their cash to buy more niche vertical software businesses. The flywheel is elegant. The execution is obsessive. And the result is a portfolio of approximately fifty businesses — most of which you have never heard of, serving industries you may not think about — that collectively generate north of $2 billion in free cash flow per year.
Roper does not appear on lists of America's most innovative companies. It does not keynote at CES. Its products help freight brokers manage loads, law firms track time, water utilities detect leaks, and food safety inspectors log compliance data. The businesses share a few common traits: they are mission-critical, deeply embedded, and spectacularly boring. This is by design.
By the Numbers
Roper Technologies at a Glance
$6.8BFY2024 revenue
~$2.1BFree cash flow (2024E)
~$60BMarket capitalization (mid-2025)
~28%EBITDA margin (consolidated)
~50Operating companies in portfolio
~18%Annualized TSR since 2001
$5.4BLargest acquisition (Vertafore, 2020)
75%+Revenue from software and network businesses
The paradox at the center of Roper's story is that it became one of the most successful capital allocators of the twenty-first century not by building anything particularly new, but by recognizing a structural truth about modern economies that most operators overlook: the most valuable businesses are often the most invisible ones. The toll booth hidden inside the workflow. The compliance database that no one will ever bother to replace. The niche platform where the total addressable market is too small to attract Amazon or Microsoft but too critical for the customers inside it to live without. Roper found a way to own dozens of these toll booths, link them together through a capital allocation engine, and turn the whole system into a compounding machine that rivals the best in American business.
How it got here — from a sleepy industrial conglomerate to a software-centric cash flow machine — is a story about two CEOs, a radical strategic transformation, and the strange alchemy of knowing when the most important thing you can do is nothing at all.
A Pump Company with Ideas Above Its Station
The company that would become Roper Technologies began its corporate life in 1981 as Roper Industries, a manufacturer of industrial pumps based in Commerce, Georgia. For its first two decades, it was exactly what it sounded like: a small, profitable maker of specialty flow-control equipment — gear pumps, centrifugal pumps, positive displacement pumps — serving petrochemical, water treatment, and industrial processing markets. The business was decent. Margins were reasonable. Growth was modest. Nobody confused it with a technology company.
But Roper Industries carried within it a structural advantage that would prove transformative: its pumps served niche industrial applications with high switching costs and recurring aftermarket revenue. If you installed a Roper pump in a chemical processing line, you didn't rip it out because a competitor offered a 3% price reduction. You bought replacement parts from Roper. You called Roper for service. The installed base was the moat, and the aftermarket was the cash cow. This was, in miniature, the same economic logic that would later define Roper's software strategy — but nobody saw it that way yet.
The intellectual architect of Roper's transformation was Brian Jellison, who became CEO in 2001. Jellison — a former GE executive with an MBA from the University of Chicago — arrived at Roper Industries with a thesis that was both simple and heretical: the company's identity as a "pump company" or an "industrial company" was a cage. What mattered was not what you made but the economic characteristics of the businesses you owned. High gross margins. Low capital intensity. Recurring revenue. Mission-critical products with deep customer entrenchment. If those characteristics could be found in pumps, fine. If they could be found in software, better.
We are not an industrial company. We are not a software company. We are a collection of the best niche businesses we can find, run by people who understand their markets better than anyone.
Jellison did not invent the idea of a decentralized conglomerate — Danaher and Berkshire Hathaway had pioneered versions of this model. But he applied a distinctive filter. Where Danaher emphasized operational improvement through the Danaher Business System (lean manufacturing, kaizen, continuous improvement applied to acquired businesses), Jellison believed that if you bought the right business — one with genuinely superior market position and economic characteristics — the need for operational intervention was minimal. You didn't need to fix what wasn't broken. You needed to let good businesses run and take their cash.
This was Roper's operating philosophy distilled: buy right, don't fix. It sounds passive. It is the opposite. The discipline required to avoid intervening — to resist the corporate instinct to centralize, to integrate, to "add value" through synergies — is enormous. Most acquirers cannot help themselves. They buy a business and immediately begin layering on corporate overhead, mandating shared services, and imposing reporting structures that slowly crush the entrepreneurial culture that made the acquisition attractive in the first place. Jellison's insight was that the highest-return action was often inaction.
The Pivot Nobody Noticed
The transformation of Roper from an industrial conglomerate into a software-centric cash machine happened gradually, then suddenly — and the market mostly missed it.
Through the 2000s and early 2010s, Jellison systematically acquired businesses that pushed Roper's portfolio toward higher-margin, lower-capital-intensity models. The early acquisitions were still partially industrial — companies like Neptune Technology Group (water meter reading technology, acquired in 2003) and TransCore (electronic toll collection and traffic systems, acquired in 2004) — but they shared a crucial characteristic: they involved technology embedded in infrastructure, generating recurring revenue from data, software, or service contracts rather than one-time hardware sales.
Roper's revenue mix transformation, 2001–2024
2001Jellison becomes CEO. Roper is ~80% industrial, ~20% technology/software. Revenue ~$1.1B.
2003Acquires Neptune Technology Group for ~$475M — water meter reading and AMI technology. First major move toward embedded technology.
2004Acquires TransCore for ~$600M — electronic toll collection, RFID, traffic management. Recurring government contracts.
2007Acquires iTradeNetwork (food supply chain software) and other vertical software assets. Software revenue crosses 30%.
2012Acquires Sunquest Information Systems (laboratory information systems for hospitals). Deepening healthcare software exposure.
2016Acquires Deltek for ~$2.8B — ERP software for government contractors and project-based businesses. Largest acquisition at the time. Software revenue exceeds 50%.
2019
The Deltek acquisition in 2016 was the inflection point. At $2.8 billion, it was by far Roper's largest deal at the time — a bet on enterprise resource planning software for a deeply niche market (government contractors, architectural firms, professional services organizations) where Deltek held dominant share. The business had exactly the characteristics Jellison prized: subscription revenue, high switching costs (try migrating your entire project accounting, time tracking, and government compliance system to a new platform mid-contract), and a customer base that was more likely to grow their usage over time than to leave.
What made the Deltek deal strategically significant was not just its size but what it signaled about Roper's capital allocation logic. Jellison was willing to pay a premium — roughly 15x EBITDA — for a business with the right structural characteristics, because he understood something about vertical software that most industrial-company investors did not: the durability of the cash flows justified the multiple. A vertical SaaS business with 95%+ net revenue retention, 70%+ gross margins, and 30%+ EBITDA margins at scale is, in effect, a toll road. The question is not whether the toll will be collected next year. The question is how wide you can make the road.
The Jellison Operating System
Brian Jellison ran Roper for seventeen years, and in that time he built something more durable than a portfolio: he built an operating system. It had a few core components.
Decentralization as doctrine. Roper's operating companies run themselves. Each business has its own management team, its own P&L, its own strategy. There is no shared sales force, no common ERP system, no centralized marketing function. The corporate headquarters in Sarasota, Florida, employs a few hundred people — a skeleton crew for a company generating nearly $7 billion in revenue. The operating company presidents report to a small group at headquarters, but the relationship is more Socratic than directive. Corporate asks questions. It reviews performance. It allocates capital. It does not tell Deltek how to sell to government contractors or Aderant how to serve law firms.
Cash flow as the organizing metric. Roper's internal performance measurement is built around free cash flow, not earnings, not revenue growth, not EBITDA. Every operating company is expected to maximize cash conversion — the ratio of free cash flow to net income — and the corporate team monitors this obsessively. The reason is structural: cash is what funds the next acquisition, and the next acquisition is how the compounding engine runs. Revenue growth is nice. Margin expansion is nice. But cash flow is the fuel.
Our businesses convert north of 100% of net income to free cash flow. That's not an accident. That's the result of the business models we select and the way our operators run their businesses.
Capital allocation as the only corporate function that matters. Jellison was explicit about this: headquarters exists to allocate capital. It does two things — deploy free cash flow into new acquisitions and return excess capital to shareholders via buybacks and dividends. Everything else is noise. The operating companies generate cash. Headquarters redeploys it. The cycle repeats.
No synergies. This is perhaps the most counterintuitive element of the Roper model. In a world where every acquisitive company promises "synergies" — cost savings from integrating back offices, revenue synergies from cross-selling, operational synergies from shared manufacturing — Roper promises nothing of the sort. The operating companies do not cross-sell. They do not share technology. They do not consolidate back offices. The value creation comes not from integration but from selection — buying the right business at the right price and letting it compound.
This philosophy was not merely temperamental. It was analytical. Jellison understood that the most common failure mode in M&A was not overpaying but over-integrating — destroying the autonomous culture, customer relationships, and operational focus that made the acquired business valuable in the first place. By promising no synergies, Roper avoided the single most destructive force in corporate acquisitions: the integration team.
The Succession and the Acceleration
Brian Jellison died in November 2018, after a battle with cancer that he largely kept private. He was sixty-two. His death was a genuine shock to Roper's investor base — not because there was no succession plan (there was; Neil Hunn had been designated well in advance) but because Jellison was so thoroughly identified with the operating philosophy that many investors wondered whether the philosophy could survive the philosopher.
Neil Hunn was, in some respects, a Jellison in negative — where Jellison could be brash, combative, and darkly funny on earnings calls, Hunn was measured, deliberate, and almost professorial. He had joined Roper in 2011 from a background in private equity (he'd been at Leonard Green & Partners) and had spent seven years inside the system, running operating groups and learning the capital allocation playbook from the inside. He was not a charismatic visionary. He was, by design, an institutional steward.
What Hunn did was subtle and consequential: he took the Jellison playbook and accelerated it. Under Jellison, Roper's portfolio shift toward software had been gradual — a slow rotation out of industrial businesses and into technology assets, punctuated by periodic large acquisitions. Under Hunn, the rotation became explicit and aggressive. In 2020, Roper executed a portfolio transformation that would have been unthinkable a decade earlier: it acquired Vertafore for $5.4 billion — its largest deal ever, funded in part by divesting the Gatan electron microscopy business and its process technologies segment for approximately $3.6 billion.
The signal was unmistakable. Roper was not merely tilting toward software; it was deliberately pruning its industrial heritage to free capital for software acquisitions. The pump company from Commerce, Georgia, was gone. In its place stood something that looked, structurally, more like a private equity-style permanent capital vehicle for niche vertical software — but one that operated within a public company framework, with the tax efficiency, access to cheap debt, and stock currency that public markets provide.
Hunn also refined the acquisition criteria. Under his leadership, Roper became even more disciplined about what it would buy:
- Vertical software serving a specific industry or workflow (not horizontal platforms competing with Salesforce or SAP)
- Mission-critical applications that are embedded in the customer's daily operations
- Net revenue retention above 95% — ideally above 100%, meaning the existing customer base grows without new sales
- Capital-light models with minimal R&D requirements relative to revenue
- Market leadership in a niche too small or too specialized for large platform companies to target
The last criterion is perhaps the most important. Roper's competitive advantage in acquisitions comes partly from operating in a zone of the market that is beneath the notice of the largest acquirers. Vista Equity Partners, Thoma Bravo, and other major software-focused PE firms hunt in overlapping territory, but their funds demand scale — they need businesses large enough to deploy hundreds of millions or billions of dollars per deal. Roper can do that, but it can also acquire businesses generating $30 million or $50 million in revenue — companies too small for megafund PE but too valuable for lower-middle-market generalists who lack the domain expertise to underwrite vertical software economics.
The Portfolio as Ecosystem
To understand Roper, you have to understand the portfolio — not as a list of companies but as an ecosystem of structural similarities.
Consider a few representative businesses:
Deltek provides ERP and project management software to government contractors, professional services firms, and architecture/engineering firms. If you are a mid-size defense subcontractor managing dozens of government contracts with different billing rates, compliance requirements, and reporting obligations, Deltek is not optional — it is the operating system of your business. The switching costs are not merely financial; they are temporal and cognitive. A migration would require retraining hundreds of employees, re-mapping years of project data, and risking compliance errors during the transition. No rational CFO authorizes this unless Deltek stops functioning entirely.
Aderant (part of the Roper portfolio through the 2018 acquisition of PowerPlan's practice management software) serves large and mid-size law firms with time and billing, financial management, and practice management software. Law firm economics are peculiar — partners bill by the hour, associates track time in six-minute increments, and the firm's entire revenue engine depends on accurate, auditable time capture and billing. Aderant sits at the nexus of this. Replacing it would mean retraining attorneys (who are, as a population, change-averse) and risking billing errors during the transition — errors that directly reduce revenue.
Vertafore provides agency management systems, rating engines, and compliance tools to independent insurance agencies. The insurance distribution market in the United States is vast, fragmented, and technologically dependent — independent agents need to access dozens of carrier systems, compare rates, manage policies, and comply with state-level regulations. Vertafore's products are the connective tissue. Its AMS360 and Sagitta platforms collectively serve tens of thousands of agencies. The network effects are real: the more carriers integrate with Vertafore's systems, the more valuable the platform becomes to agents, and vice versa.
Strata Decision Technology serves hospitals and health systems with financial planning, analytics, and decision support software. In an industry where operating margins are razor-thin (the average U.S. hospital operates at 2–4% margins) and regulatory complexity is extreme, Strata's tools help CFOs model scenarios, benchmark performance, and make capital allocation decisions. The data integrations with hospital EHR and financial systems create deep entrenchment.
DAT Freight & Analytics operates the largest electronic load-matching network for trucking in North America. It connects freight brokers, carriers, and shippers through a platform that matches available loads with available trucks. This is a network business in the purest sense — the value of the platform scales with the number of participants — and DAT's decades-long head start has created a self-reinforcing liquidity advantage. More loads attract more carriers. More carriers attract more brokers. More brokers attract more shippers. The flywheel spins.
We look for businesses where the customer's cost of switching is massively disproportionate to the price they pay us. That asymmetry is the moat.
What unites these businesses is not industry, not geography, not technology stack. It is economic structure: recurring revenue, high gross margins, low capital requirements, deep customer entrenchment, and market positions that are defensible not because of patents or brand but because of switching costs and network effects. Roper does not own the flashiest software companies. It owns the stickiest.
The Capital Allocation Engine
The beating heart of Roper is its capital allocation process, and understanding it requires understanding the arithmetic of free cash flow compounding.
Roper's operating companies collectively generate approximately $2 billion in annual free cash flow. That cash flows upstream to corporate, where it is deployed in one of three ways: acquisitions (the overwhelming priority), share repurchases (occasional), and dividends (modest but growing — Roper has increased its dividend for over 20 consecutive years). There is no significant capital expenditure requirement at the corporate level. There are no factories to retool, no distribution centers to build, no heavy R&D labs to fund. The cash comes in, and the cash goes out — into new businesses.
The acquisition pipeline is fed by a small but highly experienced corporate development team that maintains relationships across the vertical software ecosystem — with private equity firms seeking exits, with founders looking for permanent homes for their businesses, and with investment banks that know Roper's criteria. The team evaluates hundreds of potential targets per year and closes on a handful.
The underwriting process is rigorous and distinctive. Roper does not build complex discounted cash flow models with aggressive growth assumptions. Instead, it focuses on cash-on-cash returns — a private equity-influenced framework that asks: if we pay X for this business, what unlevered free cash flow yield do we earn in year one, and how does that yield compound over time through organic revenue growth and margin stability? The target is a mid-to-high teens cash-on-cash return within a few years, achieved not through financial engineering or cost-cutting but through the organic growth of a structurally advantaged business.
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The Roper Compounding Cycle
How cash flow fuels the acquisition flywheel
Step 1Operating companies generate free cash flow with minimal reinvestment needs (capex typically 1–3% of revenue).
Step 2Cash flows upstream to corporate. No dividends or retention at the operating company level — 100% of excess cash is centralized.
Step 3Corporate deploys cash into acquisitions of niche vertical software businesses meeting strict criteria (recurring revenue, high switching costs, market leadership).
Step 4Newly acquired businesses immediately begin generating free cash flow, which is added to the centralized pool.
Step 5The larger pool funds larger acquisitions. Cycle accelerates.
The elegance of this system is that it is self-funding. Roper does not need to raise equity to make acquisitions. It does not depend on continuously favorable debt markets. The free cash flow generation of the existing portfolio is sufficient to fund a meaningful acquisition program in any given year, supplemented by modest leverage (Roper typically operates at 2–3x net debt/EBITDA, with capacity to stretch to 4x for a transformative deal before rapidly deleveraging through — again — free cash flow).
The compounding math works like this: if Roper generates $2 billion in annual free cash flow and deploys that capital at a 7–8% unlevered yield (i.e., acquiring businesses at roughly 13–14x free cash flow), it adds approximately $140–$160 million in incremental free cash flow per year from acquisitions alone, before accounting for organic growth in the existing portfolio. That incremental cash flow is then available for the next year's acquisitions. And so on. The snowball grows.
Over the past two decades, this cycle has transformed Roper from a $3 billion market cap industrial company into a $60 billion market cap software compounder — a twenty-fold increase achieved not through a single moonshot but through the relentless, methodical application of a capital allocation formula.
The Church of Decentralization
Roper's decentralized operating model is not merely an organizational preference. It is a competitive weapon — one that shapes which businesses Roper can attract, how those businesses perform post-acquisition, and why talented operators choose to sell to Roper rather than to private equity.
The promise Roper makes to acquisition targets is distinctive: we will not change your business. We will not rename your product. We will not replace your management team. We will not integrate your systems into a common platform. We will not send in a team of consultants to "optimize" your operations. We will take your cash flow, and we will leave you alone.
This promise is credible because Roper has kept it, repeatedly, over two decades. The operating company presidents within Roper's portfolio are, in most cases, the same people who ran the businesses before acquisition — or their hand-picked successors. They retain authority over strategy, hiring, product development, pricing, and customer relationships. They report to a group president at Roper's corporate level, but the reporting relationship is designed to be supportive rather than directive.
The appeal to founders and management teams is obvious. If you've built a $100 million vertical software business over fifteen years, you have two realistic exit paths: sell to private equity (which will lever up the business, install a new CFO, and flip it in four to six years) or sell to a strategic acquirer (which will absorb your business into a larger entity, usually destroying the culture in the process). Roper offers a third path: sell to a permanent owner who will let you keep running the business you built, with access to a patient capital base that has no exit timeline.
This is Roper's competitive advantage in M&A, and it is harder to replicate than it appears. Any company can claim to be decentralized. The test is whether the claim survives the inevitable pressure to centralize — the moment when a new CFO suggests that shared services could save $50 million, or when a board member asks why fifty separate businesses each have their own HR system. Roper has resisted these pressures for over twenty years, and that track record is itself a moat.
We have no shared services. We have no enterprise IT system. We do not have a common procurement organization. That's not because we haven't thought about it. It's because we've thought about it very carefully and concluded that the costs of centralization outweigh the benefits.
The model has a subtle second-order benefit: it creates an information advantage. Because Roper's operating companies run independently, each one develops deep expertise in its specific vertical market. The president of Deltek knows more about the government contracting software market than anyone at Roper headquarters — and more than most people at competing software firms. This distributed expertise makes Roper a better acquirer, because it can evaluate potential targets through the lens of operators who actually understand the competitive dynamics, customer behavior, and technology evolution of each niche.
What Private Equity Cannot Do
Roper occupies a structural position in the market that is genuinely difficult to replicate, and the reason is rooted in the difference between permanent capital and fund capital.
A private equity fund has a finite life — typically ten years, with possible extensions. This means every acquisition must eventually be exited. The PE firm buys a business, improves it (or levers it), and sells it within three to seven years to generate returns for limited partners. This creates a fundamental misalignment with the kind of businesses Roper acquires: niche vertical software companies whose primary virtue is stability, not growth acceleration. A business growing at 7% organically with 95% retention and 35% EBITDA margins is a spectacular Roper acquisition — it will generate compounding cash flows essentially forever. But it is a mediocre PE deal, because there's no obvious lever to create the 2–3x return within the fund timeline.
Roper can pay more than PE for such businesses, because Roper's holding period is infinite. A business generating $50 million in free cash flow is worth more to a perpetual owner than to a four-year owner, because the perpetual owner captures the present value of decades of compounding rather than a finite exit multiple. This allows Roper to win competitive auctions against PE firms not by being reckless but by being rational — its longer duration of ownership justifies a higher entry price.
The public market structure adds further advantages. Roper can use its stock as acquisition currency (though it does so sparingly). It can access investment-grade debt at rates below what most PE firms pay. And it pays no carry to a general partner — the 20% performance fee that represents the single largest friction in PE returns flows directly to Roper's shareholders instead.
This is not to say Roper operates without competition. Vista Equity Partners, Thoma Bravo, and Francisco Partners are sophisticated, well-resourced acquirers of vertical software businesses. They compete with Roper on deals frequently. But Roper's structural advantages — permanence, lower cost of capital, no exit pressure — give it an edge in specific situations, particularly with founder-led businesses where the seller cares about legacy and operating continuity.
The 2020 Transformation and the Divestiture Signal
The year 2020 was Roper's strategic rubicon. In January, the company announced the $5.4 billion acquisition of Vertafore, funded by a combination of new debt and cash. Simultaneously, Roper announced the divestiture of its Gatan electron microscopy business and its Scientific Imaging segment — legacy industrial assets that, while profitable, did not fit the emerging portfolio profile.
The combined transactions represented approximately $9 billion in capital reallocation — buying software, selling hardware. In a single year, Roper completed the transformation that Jellison had begun two decades earlier. The company's revenue mix shifted decisively toward software, its capital intensity dropped further, and its free cash flow profile improved.
The divestiture was the more revealing signal. For most of its history, Roper had been a buyer, not a seller. Jellison's philosophy was to buy and hold — to let the compounding engine run without disruption. But Hunn recognized that the portfolio contained businesses whose economic characteristics no longer matched Roper's evolved criteria. Gatan was an excellent business — market-leading electron microscopy components — but it was a hardware business with cyclical demand, capital requirements, and a customer base concentrated in academic research. It was consuming capital allocation capacity that could be redeployed into software.
The willingness to sell — to acknowledge that not every business in the portfolio belonged there forever — marked an evolution in Roper's operating philosophy. Hunn was not merely extending the Jellison playbook; he was editing it. The result was a purer, more focused portfolio and a more powerful compounding engine.
In subsequent years, Roper continued to prune. In 2022, it sold its industrial businesses — including its legacy scientific and industrial imaging operations — to focus the portfolio even more aggressively on software and technology-enabled networks.
The Quiet Radicals
There is a type of company that fascinates a certain kind of investor — not the disruptors, not the moonshots, but the relentless compounders. Companies that do not attempt to reshape entire industries but instead find a way to extract extraordinary returns from ordinary-seeming businesses through discipline, patience, and structural intelligence. Berkshire Hathaway. Constellation Software. Danaher. Roper.
Mark Leonard, the founder of Constellation Software — Roper's closest philosophical peer — has written extensively about the economics of vertical market software, and his observations apply with equal force to Roper's portfolio. Constellation, based in Toronto, has executed a similar playbook: acquiring hundreds of small vertical software businesses, operating them with radical decentralization, and compounding cash flows into further acquisitions. The key difference is scale and style. Constellation does hundreds of small acquisitions per year (many under $10 million); Roper does a handful of larger ones. Constellation has a deeper management bench and more operating groups; Roper has a leaner corporate structure and a greater willingness to make concentrated, multi-billion-dollar bets.
Both companies have arrived at the same structural insight: vertical software businesses, properly selected and properly governed, are among the highest-quality assets available for purchase in the modern economy. They combine the recurring revenue and switching-cost dynamics of infrastructure businesses with the capital efficiency and margin profiles of software businesses. They are, in effect, digital toll roads.
The market has gradually recognized this. Roper's valuation has expanded from roughly 12x EV/EBITDA in the early Jellison era to north of 25x today — a rerating driven partly by the shift in portfolio composition and partly by the market's growing appreciation for the durability of the cash flows. At current levels, the stock is not cheap by any conventional metric. The question for investors is whether the compounding engine — the ability to deploy $2 billion+ per year into acquisitions generating mid-teens cash-on-cash returns — justifies the premium.
The answer, so far, has been yes.
A $60 Billion Machine Built on Inaction
In the spring of 2024, Roper completed its acquisition of Procare Solutions, a provider of childcare management software, for approximately $1.9 billion. The business served over 30,000 childcare providers across the United States, offering billing, enrollment management, parent communication, and subsidy tracking tools. It was, in every sense, a classic Roper acquisition: vertical, sticky, mission-critical, and invisible to anyone outside the childcare industry.
Neil Hunn described the deal in characteristically understated terms on the subsequent earnings call. There was no talk of transformation, no promises of synergies, no grand strategic vision. Just the quiet arithmetic of cash-on-cash returns, net revenue retention, and free cash flow conversion.
Back in Sarasota, the corporate headquarters remained small — a few hundred people in a modest office, far from the technology corridors of San Francisco or the financial towers of New York. There were no innovation labs, no corporate campuses, no keynote stages. Just a capital allocation engine, humming.
Somewhere in the portfolio, a freight broker in Memphis opened DAT to find a load. A government contractor in Virginia logged into Deltek to submit a progress report. A childcare center director in Ohio ran payroll through Procare. An insurance agent in Kansas quoted a policy through Vertafore's rating engine. None of them thought about Roper Technologies. None of them needed to. The cash flowed upstream all the same.
