For Kevin McArdle, the traditional model for private equity firms is a “hamster wheel cycle.” Typically, these firms raise a fund, use the proceeds to acquire companies, and eventually sell them again for maximum profit. Then the process repeats.

McArdle believes there’s another way. A longtime vice president at electronic health records company Cerner Corp., McArdle has teamed up with two other tech industry colleagues to launch a new software holding company known as Big Band Software. The trio officially incorporated the company in Minnesota in December 2022 and formally announced the effort last month.

Big Band aims to differentiate itself from other private equity firms by holding on to its acquisitions as long as possible. “There’s no time pressure to sell businesses once we buy them,” McArdle said in a Tuesday interview. “Great companies are built over decades, not years.”

McArdle and co-founders Chris Reedy and Jason Heath are starting off with a pool of $100 million for their acquisitions. Chicago-based investment firm ParkerGate and Ohio-based Talisman Capital Partners were the lead investors in that initial fund. McArdle maintains that Big Band will be “just as aggressive in trying to grow businesses and their profits. But you don’t have to do that by slashing head counts.”

Big Band’s leaders are targeting tech businesses with annual revenue between $1 million and $10 million. They have to be profitable, too. McArdle expects to execute somewhere between five and eight acquisitions a year. But that will depend on a number of factors. For instance, if Big Band ends up with additional follow-on investors, the firm will have the means to buy a few more companies.

And Big Band plans to “recycle” some of the profits from the companies it acquires to continue buying new ones, McArdle said.

“It didn’t make sense to me: If you do all this work to buy a company, grow it, and make it even better, why sell it?” he added.

The company’s incorporation documents with the Minnesota Secretary of State list a St. Paul address as its headquarters. Though it’s based in Minnesota, Big Band isn’t limited to companies based here; the firm is open to any software companies throughout North America, and perhaps even beyond. Big Band is specifically looking for software-as-a-service (aka “SaaS”) companies that serve other businesses. “Beyond that, we’re agnostic to the industries they serve,” McArdle said.

The firm’s long-term approach to private equity is not, of course, entirely novel. McArdle points to Toronto-based Constellation Software as an example of the type of holding company he wants to build. Founded in the 1990s and now publicly traded in Canada, Constellation has followed a similar model of buying companies and holding onto them as long as possible. But the firm has faced criticized for some of its methods. In a 2017 article, Bloomberg News reported that Constellation had built a reputation for “ousting founders and firing employees” at companies it acquired.

But McArdle said that’s not part of his plan for Big Band. Each acquired company’s culture, he said, will remain “front and center.” And every acquired company will keep its CEO and independence, McArdle said. As Big Band’s website says, the firm’s aim is to “harmonize, capital, culture, and teams.”

As McArdle sees it, it all boils down to relationships. Long-term ones.

“The short term buy-and-flip model doesn’t excite me,” he said. “I love building long-term relationships with people, and building cultures that are meant to last. That’s the way we’re trying to differentiate ourselves.”