GP Profile: Aurelius goes global with US expansion as it eyes new EUR 800m fund

As part of the move, the Munich-headquartered sponsor has already identified three team members to set up an office either in New York or Miami towards the end of the year. The general partner (GP) envisions building up a 10-strong team focused on operational improvements for its portfolio companies, alongside a five to seven person team focused on M&A, he said.

“We are going more global than we used to be when we started out as a small German firm almost 20 years ago,” said Markus. “Now, we see more and more activities that are outside of Europe, and as we have people on the ground in North America and Asia, you will see us doing even more global deals, especially with a focus on North America going forward.”

The M&A team will be positioned to work on platform deals, particularly US corporates carving out their global operations, he said. it is unlikely to focus is on US carve-outs where the assets operate purely in the US market, he added. Additionally, the M&A team will turn to US bolt-ons to grow its existing platform companies, he said.

Aurelius’ latest acquisition, LSG Group, is a case in point, he said, noting that the former Lufthansa-owned airline caterer and onboard retailer generates two-thirds of its USD 2bn of its revenue from North America, and there are plans to grow further there.

Other portfolio companies with a US presence include Moveero, a manufacturer of off-highway wheels, as well as Minova, a manufacturer and provider of mining and infrastructure essentials. A local Aurelius team will be important to support their growth, he said.

The carve-out market is currently quite lively after some brief pauses on the back of the pandemic lockdowns and Ukraine war, Markus said.

"The challenge everybody has in the carve-out space is that these deals take a lot of time to do – sometimes it can take a year to a year and a half,” he said. “When you have these cycles, whether COVID, Ukraine or political, they disrupt timelines.” For Aurelius, the priority is to be actively prepared to do deals whenever there is a window for corporates to consider carve-outs, he said.

Fund on the horizon

The GP’s move to target larger and more global businesses coincides with talks of fundraising for its second fund for institutional investors, which is some 18-24 months away, he said.

The fifth fund is expected to have a target size of EUR 750m-EUR 800m, which will give it capacity to make larger deals, he said. This could mean targeting companies that typically generate revenue of around EUR 500m, as opposed to the current EUR 300m-400m turnover range. It expects to deploy equity cheques of EUR 40m-EUR 120m, an increase from its current EUR 20m-EUR 80m range.

The new strategy would be larger than the incumbent European Opportunities IV, which received total commitments of EUR 540m. The 2021-vintage fund secured EUR 380m from LPs, including pension funds, insurance, funds-of-funds, and family offices along with some investors from the North American market, according to Unquote Data. The remaining EUR 160m was funded from its listed vehicle, Aurelius Equity Opportunities.

Beyond targeting larger opportunities, the core focus of corporate carve-outs is expected to remain fundamentally the same, Markus said: "We made our name as a as a specialist for operationally intensive corporate carveouts, and that's our sweet spot and has always been our sweet spot," he said.

Aurelius has begun “passively marketing” for the new fund, involving talking to potential investors, attending conferences and distributing newsletters. In addition to re-ups from existing LPs, new LPs are likely to be approached given the 50%-plus increase in size of the upcoming fund.

European Opportunities IV is currently 40% deployed across seven platform companies, including UK-based Hallo Healthcare Group, the parent company to LloydsPharmacy. Other companies include UK sports retailer Footasylum.

[Editor's note: Post-publication, the last paragraph was amended to clarify that European Opportunities IV has also invested in Footasylum.]

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