The ‘asset stripper’ that tried to clean up on The Body Shop

Aurelius’s purchase of The Body Shop set one of the pioneers of kinder commerce on a collision course with the sharper end of capitalism. So far, the retailer’s collapse has led to 800 job losses and 82 store closures, and raised serious questions over the conduct of a firm that had pledged to reinvigorate The Body Shop and deliver its “next chapter of success”.

A Sunday Times analysis of Aurelius’s past deals shows the reality often bears little resemblance to the lofty rhetoric. In recent years, the firm has dismantled or pushed six other UK businesses into insolvency relatively soon after acquisition.

It was founded in Germany in 2005 by two former partners at the management consulting giant McKinsey, Dirk Markus and Gert Purkert, who remain the driving forces behind the business. Markus, a cycling fanatic who splits his time between Germany and London, has described Aurelius as a “hospital for sick businesses”. The firm’s UK operations — based in a Regency building next to Piccadilly Circus — are led by a mild-mannered, fast-talking financier, Tristan Nagler.

The campaign poster against Aurelius as Body Shop employees urge the government to review the insolvency system

Aurelius specialises in acquiring neglected, often troubled, parts of sprawling corporations. Once it has bought a business, it dispatches a hit squad of consultants from Germany to sprinkle a bit of McKinsey-esque magic — fine-tuning everything from marketing to buying and IT.

“It’s a bit like they put the company on the operating table and try to cut out the rot. They are dispassionate and clinical,” said one executive at a business swooped on by Aurelius.“But if the patient can’t be saved, they make sure they’re not the ones that suffer.” The firm typically protects its position on risky investments by putting up only a thin slice of its own capital to fund deals.

Aurelius’s defenders argue that turnaround investors willing to take a chance on a failing business are an important part of the financial system, and that they are more suitable owners than opportunists such as Dominic Chappell, the former bankrupt who infamously took over BHS. Yet their uncompromising approach makes them plenty of adversaries along the way.

Aurelius has bought more than 20 UK businesses over the past decade — spanning everything from cloud computing to domiciliary care providers — but it was not until two years ago that the City really took notice.

The £477 million deal to buy McKesson UK — owner of Lloyds Pharmacy — was the biggest in Aurelius’s history when it was sealed in 2022. After espousing the “special” nature of a pharmacy licence to The Sunday Times shortly after the takeover, Aurelius sold off almost all of the 1,054 pharmacies that Lloyds held within 18 months.

Aurelius raked in hundreds of millions of pounds in what was the biggest sale of pharmacies that the industry had ever witnessed. Hutchings Consultants, which sold about 10 per cent of the portfolio, recorded an average sale price of £453,623 for Lloyds pharmacies in England and Wales, rising to £888,323 in Scotland. Aurelius also closed all 237 Lloyds branches in Sainsbury’s supermarkets.

In less than two years, the UK’s second-largest chain of community pharmacies had disappeared from the high street altogether.

Now, Aurelius is understood to have appointed advisers to sell wholesaler AAH Pharmaceuticals, another part of the McKesson UK portfolio, in a deal that is likely to fetch hundreds of millions of pounds.

A source close to Aurelius said it had mistakenly believed that the pharmacies’ poor financial returns would improve when the NHS outsourced more procedures, yet this was slow to materialise. The source added that Aurelius had been the catalyst for a range of operational improvements at AAH.

A similar story unfolded at home-shopping group Ideal Shopping Direct, which was dismantled within four years after Aurelius bought the business in 2018, and at the European operations of American retail giant Office Depot, which employed about 6,000 people when Aurelius took it over in 2016.

Bertram’s ‘bereavement’

June 19, 2020, was a sad day for Norwich. Bertram Books, a big wholesaler to independent booksellers and an important employer in the city, collapsed into administration with the loss of 450 jobs. Kip Bertram, who founded the business in a chicken shed in 1968 with his mother Elsie, likened it to a bereavement.

Bertram Books, co-founded by Elsie Bertram, collapsed into administration two years after its purchase by Aurelius

KEITH WHITMORE

Bertrams had been troubled for a number of years, but when Aurelius bought it from Connect Group in 2018, along with a collection of other related businesses, it declined to take on Bertrams’ parent company guarantee, which led publishers to renegotiate on less favourable terms.

By the time of Bertrams’ collapse two years later — after the onset of the pandemic — Aurelius had already sold off all the other parts of the business, including online book retailer Wordery. Bertram’s administration left about 2,500 creditors £25 million out of pocket.

Sources close to Aurelius insist that insolvencies are never the firm’s Plan A. They argue that the businesses it buys are often in precarious situations — and that the speed at which they are auctioned means it is not uncommon to find a nasty surprise in a company’s books after completion.

“Aurelius do not intend to end up in these insolvencies,” said a City adviser who has worked with the firm. “But are they scared of ending up there? Absolutely not.”

The Aurelius playbook

When a portfolio company approaches the corporate graveyard, Aurelius falls back on a tried and tested playbook. Its partners are replaced as company directors by one of a handful of trusted businessmen and the private equity firm typically appoints Turpin Barker Armstrong, a little-known accountancy practice in Sutton, south London, to run the administration.

Among Aurelius’s go-to guys is corporate undertaker Friedrich Trautwein, a hard-nosed insolvency specialist known as Markus’s hatchet man. “You know it’s ‘the end of days’ when Friedrich turns up,” said one City source.

Trautwein, who has known Markus for decades, handled the contentious insolvency of Allied Healthcare, the UK’s largest provider of home care to vulnerable people, which collapsed less than three years after Aurelius bought the business from Saga.

That controversy was nothing compared to the storm that erupted over the collapse of The Body Shop.

Aurelius bought the business from Brazilian beauty giant Natura last November in a deal that valued the retailer’s debt and equity at £207 million. However, Aurelius stumped up just £3.5 million of its own capital upfront, with further financial contributions dependent on performance.

Anita Roddick launched many campaigns through The Body Shop, including petitions to end animal testing and stop human trafficking

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Aurelius mistakenly believed that HSBC — which provided the retailer with cash-pooling facilities and rental guarantees on shops — would continue to support The Body Shop financially under its ownership. When the bank said it had no intention of doing so, it contributed to a £40 million hole in Aurelius’s plans.

A few weeks after the deal closed, the private equity firm controversially offloaded swathes of The Body Shop’s lossmaking international operations to an unnamed “family office”. It would later transpire that this mystery buyer was, in fact, controlled by Trautwein.

Body Shop insiders said that a warm atmosphere in the run-up to the deal soon disintegrated into something more toxic. “There has been a complete lack of cultural understanding. Aurelius just couldn’t get their heads around why The Body Shop ran a community fair trade programme and why it was a competitive advantage — they just saw it as a cost,” one insider said.

After The Body Shop’s collapse, Aurelius favoured a restructuring known as a company voluntary arrangement (CVA), because that would allow it to retain ownership of the chain. However, the move was blocked by Natura, which remains one of The Body Shop’s major suppliers. That has forced a fresh auction of the chain, with Aurelius poised to table a new bid. High street giants Marks & Spencer and Next are among the potential suitors running a rule over the business.

As the future of a totemic retailer gets thrashed out in City offices, the pain for the affected staff caught up in the mess is very real.

Davis, the former Body Shop director, hopes the retailer’s latest campaigncan offer some solace to his former colleagues. If the petition reaches 10,000 signatures it will force a parliamentary debate.

“My hope is that this will be the shortest, sharpest Body Shop campaign in history,” Davis said. “But sadly it could be the last one The Body Shop ever does.”