How we work
We joined forces with Aareal Bank to transform its software subsidiary, Aareon, into a fully independent player within the property management space.
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The opportunity
Carve-out of a property software platform, allowing it to thrive as a standalone business and enabling it to become a European leader within a growing market.
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The approach
Enhance the management team and invest behind talent to collaboratively build a high-performance and customer success-oriented culture, streamline operations, and execute strategic acquisitions in key markets.
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The impact
Transformed the business into a leading European software-as-a-service (SaaS) platform in the property management space. Increased the number of properties managed from 10 million at entry to 19 million within four years.
Scouring the market
At Advent, our dedicated tech team has developed a deep understanding in the software industry through our sub-sector focus. Over the years, we’ve backed more than 98 technology companies and have invested more than USD $13 billion of equity. A particular area of focus is on businesses that provide software solutions to a specific sector, known in the industry as ‘vertical’ application software companies.
Advent had built a sourcing cell in vertical software. The pattern recognition developed through intensive research within this segment led us to identify Aareon long before we made our investment in October 2020. Based in Mainz, Germany, Aareon developed a suite of software products that connect property companies with tenants, buildings, suppliers, and service partners. They had built an impressive array of products, including software for financial and maintenance management of properties, software that drives more sustainable energy use by monitoring and optimizing usage, payment solutions for landlords and tenants, and solutions for maintenance contractors. While it was already a leading player in the social housing space, our thesis was that there was a significant opportunity to grow in adjacent types of property, and that the business’ proposition would be successful across many other areas within the large and resilient market of more than EUR €11 billion across Europe.
“Our partnership with Advent has rapidly advanced our evolution into one of Europe’s most trusted SaaS providers, launching us on an exponential growth trajectory. We are grateful for their expertise and support, which have been crucial to our development and laid the foundation for further success.”
Harry Thomsen
CEO, Aareon
A hidden asset with great potential
In 2019, Aareon was a subsidiary of Aareal, a commercial real estate bank, which over the years had developed various software and payment solutions for its clients. When Aareal started looking for a partner to optimize the value of this hidden software gem, Advent was a natural fit.
Not only do we have significant experience in software – alongside a long-established presence in Germany – we are also one of the few private equity players to have partnered with regulated banks on carve-outs of subsidiaries, such as the payments business Worldpay, which we acquired from the Royal Bank of Scotland in 2010. We’ve also owned banks in Europe outright, including Addiko Bank in Austria, which we acquired in 2015. The experience of working in a highly regulated European banking and payments environment was pivotal in establishing credibility with Aareal. It also helped us to get comfortable with the investment, which at the outset would be highly complex and require us partnering with Aareal as minority shareholders.
It was an unusual investment structure, with a healthy dose of governance and stakeholder complexity, but from the start we had conviction that Aareon’s potential warranted pursuing the transaction.
The team to get the job done
When Advent initially invested in Aareon, it was clear to all parties that we were embarking on a challenging journey together. The incumbent leadership had done an incredible job building the business from within the bank, and some individuals had worked at Aareon for 20 years. Nevertheless, we all agreed that it would be healthy to bolster the leadership team by introducing additional perspectives as we collaboratively shifted the culture to one of a more modern, best-in-class software business.
We identified Harry Thomsen as a highly effective and capable executive who would help to deliver this change. Thomsen had been a senior executive at SAP for years, and we recognized a kindred spirit in terms of his restless drive and focus on building high performing teams and organizations, and appointed him CEO of the new carved out business.
With strategic M&A plans on the horizon, Bas Joosten, an Advent colleague who played an important role as part of the Advent team on the deal, joined the Aareon team to provide insight and guidance on M&A activity. He played a pivotal role in the early days in helping to shift the company’s reporting mindset from that of a bank subsidiary to that of a standalone software business.
We also began a broader program of recruiting high-caliber software talent, making both key management hires and launching a new graduate recruitment program. Aareon’s rejuvenated workforce provided diverse perspectives and new ideas, and was empowered from the outset with clear ownership and responsibilities. This shift in organizational mindset cascaded across all levels of the business, helping to drive significant cultural change.
Building on solid foundations
Operational improvement was the next big lever in our transformation plan. When Advent invested, the company had a strong suite of customer-approved products but lacked a clear product roadmap to prioritize research and development spend. In collaboration with the management team, the first task was to develop a clear roadmap, and to focus allocation of resources and spend in the most efficient manner. In addition, we focused on developing a go-to-market strategy that was grounded in industry best practices and past successes. This included developing a go-to-market strategy in partnership with the CRO that provided greater autonomy to local sales teams with deep market knowledge to cross-sell products.
The transition to SaaS was always a critical factor in our value creation plan and, in partnership with the Portfolio Support Group, the team helped create a dedicated ‘Cloud Success Services’ team to support the company and allow them to manage this transition – improving recurring revenues and shifting the internal mindset to that of a SaaS business.
Bolting on extensions
Acquisitions were also a clear part of Aareon’s planned growth, and Advent based its investment thesis on three key themes that eventually became pillars of the strategy: growing revenue per unit, growing unit base, and growing geographic and strategic footprint. Prior to the completion of the investment, we had drawn up a comprehensive list of acquisition targets.
Over the course of four years, we acquired 14 businesses, focused on four key markets – Germany, the Netherlands, Sweden, and the UK – and entering the market in Spain. The acquisitions helped Aareon to better meet customer needs by providing new technological solutions, such as country-specific client portals and apps.
10M
Number of properties managed in 2020
19M
Number of properties managed as of 2024
A new chapter
In 2024, Advent and Aareal Bank agreed to sell a majority interest in Aareon to investors TPG and CDPQ.
As part of this process, Advent was invited to re-invest a minority stake in Aareon, in recognition of the firm’s critical role supporting the development of the business. This infusion of capital from TPG and CDPQ is a natural next step for Aareon, allowing the continued acceleration of the organization as it continues to grow on its journey to become a juggernaut in the European software business. In addition, this opportunity aims to provide Aareon employees with a greater array of career development options, as well as offer customers additional value-added solutions.
At Advent, we aim to work with companies where there is the possibility to cultivate long-term growth through various value-creation levers. These investments typically require creative thinking, an appetite for complexity, and large amounts of operational support. Our investment in Aareon epitomized this approach and we’re proud of what we achieved together. Under our partnership, Aareon increased the number of properties managed from 10 million at the time of our entry to 19 million as of September 2024, and grew the number of customers from around 3,000 customers to over 13,000 customers in the same period. We’re excited to continue supporting Aareon on its journey to becoming a €1 billion revenue company.
“This was a complex transaction that brought together Advent’s global experience in software with our history of working with banks on non-core subsidiaries. We are proud of the successful transformation of the business into a European standalone software champion.”
Jeff Paduch
Managing Partner, Advent
