Since Aurelius’ London office on Saville Row opened 18 months ago, the German-listed investment company has completed six deals in the UK and Ireland and has a “rich” pipeline of future transactions, Aurelius managing director Tristan Nagler told Private Equity International.
By the end of July, the firm will have completed the acquisition of the EMEA crafts business of UK consumer textile business Coats Group, its third UK deal-related announcement in July.
On 23 July, Aurelius announced it had completed the acquisition of UK cosmetic procedure company Transform Medical Group for an undisclosed sum, which followed its acquisition of UK plastics recycler Regain Polymers Holdings from Chamonix Private Equity announced on 13 July.
Regain will sit alongside UK plastic bottle recycler Eco Plastics, acquired in December 2014, Nagler said.
“There’s real momentum in the UK business,” Nagler said. “The UK is our second most important market after our home market. It’s a competitive and large market and we have done a good number of deals from a standing start.”
Since Nagler joined the firm in London 18 months ago, the office has grown from two people to 12 and is actively hiring, he said.
The firm has been active in the UK and Ireland since 2007, investing from its Munich base and completing a transaction every eighteen months, Nagler said. Of Aurelius’ 25 portfolio companies spread across Europe and focused in German-speaking countries, eight are in the UK.
“Going forward, the UK economy and the change of government gives us a favourable backdrop. Coming out of a recession does drive disposals,” Nagler said.
The company invests off its balance sheet, targeting corporate carve-outs of orphaned business with the potential for operational improvements, businesses that are in need of restructuring operationally or financially, and businesses that have synergies with its existing investments, according to its website.
Aurelius will consider acquisitions of difficult corporate situations including litigation, key customer risk, management issues, and pension risk, Nagler said.
“We are evaluating a couple of deals with defined benefit pension schemes. These situations make buyout firms concerned as they are not necessarily resolved within a three to five year time horizon,” he noted.
Typically, the firm makes all-equity investments of €5 million to €50 million in businesses with revenues of between €20 million to €1 billion and deal values of up to €150 million. It targets the business services, chemicals, consumer goods, food and beverage, industrials and TMT sectors. “It’s rare for us to seek leverage finance,” Nagler noted.
The UK transaction pipeline is strong, but the firm is careful not to buy deal flow by paying high prices, Nagler commented when asked about valuations.
“In corporate carve outs and restructurings, these processes require buyers that are certain. We win the opportunity to buy a business because the seller is confident we will close the deal. Our ability to compete in an accelerated fashion is sometimes more important than value,” he said, citing Eco Plastics as a fast transaction.
Aurelius’ average hold period is six years and its exits have been primarily sales to strategic buyers rather than private equity, Nagler said.
“In the UK market, we’ve only had a couple of exits. We have a young portfolio,” he said.
The firm sold Irish plastics company Wellman International in 2011 for €42 million generating a return of 5.8x money on its investment made in 2007. “It was bought for a nominal price and our operational change programme drove a strong exit,” Nagler commented.
The firm has also sold UK home shopping TV broadcaster Sit-Up TV with a positive money multiple, he said. The company was acquired in 2009 and sold in 2012, according to Aurelius’ website.