Advent and Aareal Bank sell Aareon to TPG for € 3.9 billion

Wies­ba­den — Aareal Bank and Advent Inter­na­tio­nal (“Advent”) have announ­ced that they have ente­red into an agree­ment with TPG and CDPQ to acquire Aareon, a Euro­pean provi­der of Soft­­ware-as-a-Service (SaaS) solu­ti­ons for the real estate indus­try. The finan­cial terms of the sale were based on an enter­prise value for Aareon of around € 3.9 billion, which corre­sponds to a valua­tion of Aareal Bank’s stake in Aareon of around € 2.1 billion. The closing of the tran­sac­tion is expec­ted to take place in the second half of 2024, subject to the usual condi­ti­ons and regu­la­tory approvals.

The tran­sac­tion and part­ner­ship with TPG will provide Aareon with access to addi­tio­nal specia­li­zed resour­ces and exper­tise to drive inno­va­tion and future growth. TPG will invest in Aareon through TPG Capi­tal, the company’s US and Euro­pean private equity plat­form, in a consor­tium with CDPQ, a global invest­ment group. CDPQ will acquire a mino­rity stake in Aareon along­side TPG as a co-inves­­tor. Advent will conti­nue its invest­ment in Aareon and invest new equity for a mino­rity stake in the inde­pen­dent company.

With its property manage­ment system, Mainz-based Aareon promo­tes the effi­ci­ent and sustainable manage­ment and main­ten­ance of real estate. The Aareon port­fo­lio enables seam­less, auto­ma­ted end-to-end proces­ses that connect property mana­gers and owners in the resi­den­tial and commer­cial real estate sectors.

Jochen Klös­ges, Chair­man of the Manage­ment Board of Aareal Bank and Chair­man of the Super­vi­sory Board of Aareon AG, said: “We are deligh­ted to have found new owners for Aareon, whose finan­cial strength and exten­sive indus­try expe­ri­ence put them in a good posi­tion to take Aareon to the next major stage of its deve­lo­p­ment. In recent years, we have deve­lo­ped Aareon into a ‘Rule of 40’ company that has grown orga­ni­cally and inor­ga­ni­cally in an impres­sive manner. We will conti­nue our successful coope­ra­tion via our joint venture First Finan­cial Soft­ware. This not only streng­thens our long-term part­ner­ship with Aareon, but also opens up further growth pros­pects for all parties involved.”

Flavio Porciani, Part­ner at TPG, said: “We have been enthu­si­a­stic about Aareon’s role as one of the leading compa­nies in the Euro­pean real estate manage­ment indus­try for many years. We look forward to working in part­ner­ship with the Aareon team and our co-inves­­tors to conti­nue the company’s busi­ness success in its future inde­pen­dence. The need for compre­hen­sive property manage­ment solu­ti­ons is growing in view of the incre­asing digi­ta­liza­tion of work­flows and the ever more complex regu­la­tory requi­re­ments in the property indus­try. Aareon’s offe­ring responds to this deve­lo­p­ment by provi­ding owners and decis­­ion-makers in the property indus­try with an inte­gra­ted, modern system that impro­ves connec­ti­vity and opti­mi­zes busi­ness processes.”

Jeff Paduch, Mana­ging Part­ner of Advent Inter­na­tio­nal and member of the Aareon Super­vi­sory Board, commen­ted: “We are proud to have supported Aareon’s manage­ment team and employees in the successful trans­for­ma­tion leading to one of the largest corpo­rate sales in the Euro­pean soft­ware indus­try in 2024. The company is well posi­tio­ned to conti­nue to act as an inno­va­tion leader for its custo­mers in the Euro­pean housing indus­try ecosys­tem. Aareon is on a sustainable growth path and offers exci­ting future oppor­tu­ni­ties for all stakeholders.”

Harry Thom­sen, CEO of Aareon, said: “This tran­sac­tion is a mile­stone in Aareon’s deve­lo­p­ment. Thanks to the strong support of our owners Aareal Bank and Advent Inter­na­tio­nal, the company has made excel­lent progress in recent years. Now we can take the next step in our deve­lo­p­ment. We are in an ideal posi­tion to take advan­tage of further growth oppor­tu­ni­ties and welcome TPG and CDPQ as expe­ri­en­ced and strong new partners.”

Even after the tran­sac­tion, Aareal Bank and Aareon will conti­nue their close coope­ra­tion and support their clients toge­ther via the First Finan­cial Soft­ware joint venture. First Finan­cial Soft­ware offers custo­mers specia­list exper­tise in payment tran­sac­tion soft­ware solu­ti­ons for the real estate indus­try and rela­ted sectors.

Signi­fi­cant gain on dispo­sal after tran­­sac­­tion-rela­­ted costs expec­ted in 2024

The sale of Aareon will result in a signi­fi­cant gain on dispo­sal for Aareal Bank Group, after tran­­sac­­tion-rela­­ted costs of around € 2 billion. This will be reco­gni­zed upon comple­tion of the tran­sac­tion (closing), which is expec­ted in the second half of 2024. Howe­ver, the majo­rity of the costs asso­cia­ted with the tran­sac­tion, amoun­ting to around € 150 million, will alre­ady be reco­gni­zed in the second quar­ter when the tran­sac­tion is signed. The gain on dispo­sal less the costs asso­cia­ted with the tran­sac­tion was not included in Aareal Bank Group’s previous fore­cast for the 2024 finan­cial year. This will now be adjus­ted upwards. In addi­tion, Aareon will be repor­ted as a discon­tin­ued opera­tion in accordance with IFRS 5 from the second quar­ter until closing.

Aareal Bank is well on track to achieve its opera­ting target of € 250 million to € 300 million for the 2024 finan­cial year in the banking busi­ness exclu­ding Aareon. The bank alone gene­ra­ted a conso­li­da­ted opera­ting result of around € 92 million in the first quar­ter of 2024 and an opera­ting result of € 221 million in the 2023 finan­cial year. The Common Equity Tier 1 capi­tal ratio (Basel IV phase-in) was 19.7% at the end of the first quar­ter of 2024.

Arma Part­ners acted as lead finan­cial advi­sor and Gold­man Sachs acted as finan­cial advi­sor to Advent Inter­na­tio­nal and Aareal Bank, CMS acted as legal coun­sel to Aareal Bank.

Weil, Gotshal & Manges LLP advi­sed Advent Inter­na­tio­nal on legal matters.

Morgan Stan­ley & Co. Inter­na­tio­nal Plc acted as finan­cial advi­sor to TPG and CDPQ and Kirk­land & Ellis LLP acted as legal counsel.

About Aareal Bank Group

Aareal Bank Group, head­quar­te­red in Wies­ba­den, is a leading inter­na­tio­nal real estate specia­list. The Bank uses its exper­tise to iden­tify trends, chal­lenges and oppor­tu­ni­ties at an early stage and exploit them for the bene­fit of its stake­hol­ders. Aareal Bank Group offers smart finan­cing, soft­ware products and digi­tal solu­ti­ons for the property sector and rela­ted indus­tries, and is repre­sen­ted on three conti­nents — in Europe, North America and Asia. Aareal Bank Group’s busi­ness stra­tegy is geared towards sustainable busi­ness success, with ESG (envi­ron­men­tal, social and gover­nance) aspects as key components.

Aareal Bank AG compri­ses the Struc­tu­red Property Finan­cing, Banking & Digi­tal Solu­ti­ons and Aareon segments. The Struc­tu­red Property Finan­cing segment compri­ses Aareal Bank Group’s property finan­cing and refi­nan­cing acti­vi­ties. Here she assists clients with large-volume invest­ments in commer­cial real estate. In the Banking & Digi­tal Solu­ti­ons busi­ness segment, Aareal Bank Group offers compre­hen­sive advi­sory services and product solu­ti­ons to compa­nies from the housing and property indus­tries, as well as the energy sector, as a digi­ta­liza­tion part­ner, bund­ling these with tradi­tio­nal corpo­rate banking and depo­­sit-taking busi­ness. The subsi­diary Aareon, Europe’s proven provi­der of SaaS solu­ti­ons for the property indus­try, forms the third busi­ness segment.

About Advent International

Foun­ded in 1984, Advent Inter­na­tio­nal is one of the largest and most expe­ri­en­ced global private equity inves­tors. The company has inves­ted in over 420 private equity invest­ments in 43 count­ries and had assets under manage­ment of EUR 84 billion as of Decem­ber 31, 2023. With 15 offices in 12 count­ries, Advent has built a globally inte­gra­ted team of over 302 private equity invest­ment profes­sio­nals in Europe, North America, Latin America and Asia. The company focu­ses on invest­ments in five core sectors, inclu­ding busi­ness and finan­cial services, tech­no­logy, health­care, indus­try and retail, consu­mer goods and leisure. After 40 years in the inter­na­tio­nal invest­ment busi­ness, Advent conti­nues to pursue the approach of working with manage­ment teams to achieve sustainable sales and earnings growth for its port­fo­lio compa­nies. www.adventinternational.com

About TPG

Foun­ded in 1992 in San Fran­cisco, TPG is a globally active alter­na­tive asset mana­ger. The company mana­ges US$ 224 billion in assets and has invest­ment profes­sio­nals and opera­ti­ons around the world. The spec­trum of TPG’s invest­ment stra­te­gies is broadly diver­si­fied and includes private equity, impact inves­t­ing, credit, real estate and market solu­ti­ons. Our unique stra­te­gic approach is based on colla­bo­ra­tion, inno­va­tion and inclu­sion. Our teams combine in-depth product and sector expe­ri­ence with broad exper­tise and distinc­tive skills. This gives us diffe­ren­tia­ted insights and crea­tes value for our fund inves­tors, port­fo­lio compa­nies, manage­ment teams and stake­hol­der groups. You can find out more about TPG at www.tpg.com.

About CDPQ

CDPQ pursues a cons­truc­tive invest­ment approach in order to gene­rate sustainable returns over the long term. As a global invest­ment mana­ger, we manage funds for public pension and bene­fit funds; toge­ther with our part­ners, we build compa­nies that drive perfor­mance and progress. We are active in the most important finan­cial markets as well as in private equity, infra­struc­ture, real estate and private debt. As at Decem­ber 31, 2023, CDPQ had net assets of CAD 434 billion. For more infor­ma­tion, visit cdpq.com, our presence on Linke­dIn and Insta­gram, or follow us on X. — CDPQ is a regis­tered trade­mark of Caisse de dépôt et place­ment du Québec and licen­sed for use by its subsidiaries.

About Aareon

Aareon is Europe’s estab­lished provi­der of SaaS solu­ti­ons for the real estate indus­try and a pioneer for the digi­tal future of the sector.

By connec­ting people, proces­ses and proper­ties, Aareon is crea­ting a closely networked real estate ecosys­tem. Our property manage­ment system offers intel­li­gent soft­ware solu­ti­ons for effi­ci­ently mana­ging and main­tai­ning proper­ties and digi­tally inte­gra­ting all stake­hol­ders. As a relia­ble and inno­va­tive part­ner, we are passio­na­tely commit­ted to sustainable living and working spaces.