BUYOUT group Aurelius is scouring Scotland for takeover targets as it seeks opportunities to invest its €220 million (£175m) cash pile away from an overheating London market.
The firm’s UK managing director, Tristan Nagler, was in Edinburgh last week meeting mergers and acquisitions (M&A) advisors, and told Scotland on Sunday that he expects to buy at least one mid-sized business a year north of the Border.
He said the UK, and Scotland in particular, is now the most attractive area in Europe for private equity.
“We are a cash rich buyer coming to a market where there isn’t that much competition,” he said. “Edinburgh has a very sophisticated M&A scene that has been going a long time, so it’s a well-advised market. We like working with M&A advisors, because there is less risk of a deal not happening.”
The group, which is listed on the Frankfurt stock exchange, invests across Europe and Nagler is undaunted by the prospect of the referendum – whatever the outcome – as he said the fund is used to working across borders.
“It doesn’t concern us,” he said. “We often like investing into uncertainty, because fortune favours the brave.”
Aurelius does not have a timetable for spending its cash, or for divesting the businesses it buys, but Nagler said he expects to complete about eight deals a year, with the UK taking the lion’s share.
“The UK is becoming more and more of a focus for us. We have come to a view that it’s a much more interesting place [than most of continental Europe]. Everything is pointing to a strong recovery.”
But he says London has overheated in recent months, making it a sellers’ market. And as a company that likes to buy “real businesses” rather than service sector firms, Scotland and the north of England have more targets. Aurelius has done one deal in Scotland in the past, the 2010 takeover of CalaChem, a Grangemouth-based chemicals company which it still owns.
Nagler says he expects to buy between two and four UK businesses each year, with at least one of them located north of the Border.
“Often when you do a deal it brings about others,” he said.
His preferred targets are mid-sized firms, with turn-overs of up to £30m and a value of up to £20m – he has ruled out anything with an “oil and gas price tag”. Manufacturing and the food and drink sectors are on his shopping list, although he has not yet found a specific business that fits his requirements.
The main threat to Aurelius’ UK buying spree is an increase in bank lending which is threatening to push up prices. Nagler said such “overheating” could eventually force the firm to look for cheaper opportunities in Spain or the Nordic countries instead.