Aurelius establishes small LBO arm

The expansion comes shortly after the German-listed firm netted a 25.7x return on the sale of a Swiss IT service provider

The Aurelius Group, a German-listed private equity firm typically focused on company restructurings and special situations, has created a new division which will target investments in German Mittelstand companies.

Aurelius Mittelstandskapital will take majority interests in German small- and medium sized businesses and corporate spin-offs with annual revenues up to €50 million in the form of leverage buyouts, according to a statement.

The newly formed investment team will target “the large number of promising takeover targets in the German-speaking area which is shaped by family enterprises and mid-sized firms,” Aurelius said. The Mittelstand includes around 3.7 million companies, over 95 percent of which are family-owned businesses.

Aurelius Mittelstandskapital will invest in companies with double-digit EBITDA margins, good cash flows, an established market position and a good customer base with the potential to expand both revenues and earnings through organic growth and add-on acquisitions, Aurelius said.

Aurelius Mittelstandskapital will target one or two deals per year using capital from Aurelius' balance sheet, according to a source close to the matter. The team consists of four existing Aurelius deal makers, the source added. Aurelius declined to comment beyond the statement.

The launch of Aurelius’ small leverage buyout arm comes shortly after the firm completed two successful exits. Last week it sold Swiss IT service provider connectis as well as its small sister company SOFTIX to SPIE Group,  a European service provider of electronics and information technology, netting the firm a 25.7x return. A week prior, Aurelius sold Hungarian-based Framochem, a manufacturer in the chemical sector, which yielded a 24.5x return, a source told PEI last week.

Aurelius typically invests in European companies with revenues between €30 million and €750 million in deals with an enterprise value of up to €150 million. It has offices in Munich and London as well as 21 subsidiaries in Germany, England, France, Ireland, Poland, Hungary, the Netherlands and Switzerland.