It's an opportune time to be acquiring lean software companies, and a Minneapolis holding company is prepping to spend $100 million to do just that.
New Minneapolis holding company wants to spend $100M to buy software companies
Big Band Software is focused on business-to-business software companies generating between $1 million and $10 million in annual revenue.
February 28, 2023 at 3:05PM
Big Band Software, which launched on Tuesday, expects over the next several years to build a portfolio of software-as-a-service (SaaS) companies that sell their products to much larger companies.
Founders Chris Reedy, Jason Heath and Kevin McArdle aim to buy software companies generating between $1 million and $10 million in annual revenue from founders who grew their company without venture capital, own the majority of their company, or who fully own their companies.
The transaction cost will fall between $3 million and $20 million each, and the company is willing to deploy more capital as needed to grow the businesses for long-term profitability. McArdle said its current projection of six deals per year is on the conservative end; there is no limit or minimum threshold for the number of acquisitions annually.
In 2022, the deal value for software companies was at a six-year high in the U.S., with buyers spending $453.2 million across 1,614 deals, according to Seattle-based investment tracker PitchBook. The business-to-business SaaS sector's deal value was also at a six-year high — $31.2 million through 82 deals.
And while global software deals fell in 2021, mostly due to the overall economic downturn driven by the pandemic, mergers and acquisitions in the space remain above pre-pandemic levels, according to PricewaterhouseCoopers. What's more, interest in on-demand, cloud-based software companies — like those sought by Big Band — is expected to grow in 2023.
The Minneapolis buy-and-hold company wants to develop a portfolio of companies serving multiple industries, including e-commerce, health technology and education technology, McArdle said. An eventual public offering, he added, is not off the table.
Partners in the acquisition company include a Chicago-based private equity firm, ParkerGale, and Talisman Capital Partners, a private investment company that's based in Columbus, Ohio.
McArdle, most recently CEO of Edina-based SureSwift Capital, will run the company as chief executive.
"In many ways we're trying to do the opposite of what traditional private equity would do," McArdle said in a release. "We want to buy great companies and own them as long as we can."
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