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Bain Capital to invest $360 mn in Korea’s top ERP developer

Mar 02, 2021 (Gmt+09:00)

Bain Capital to invest 0 mn in Korea’s top ERP developer

Bain Capital has agreed to invest around 400 billion won ($360 million) in South Korea’s leading enterprise resource planning (ERP) software developer Douzone Bizon Co. to become its second-largest shareholder, according to investment banking sources on Mar. 1.

The US private equity firm will take over about a 10% stake in the Kospi-listed Douzone from existing shareholders, including some of Chief Executive Kim Yong-woo’s 5.72% holdings. The ERP developer expects the stake sale to accelerate its global expansion by tapping into Bain Capital’s worldwide network.

As of late February, Kim and Douzone Holdings, the parent company of the ERP system provider, have a combined 35.6% stake in Douzone Bizon. After the stake deal that involves no rights issue, CEO Kim will continue to manage the company.

Based on its current market capitalization of 3.4 trillion won, the 10% stake is worth 340 billion won. Considering Bain Capital's planned additional investment in Douzone Holdings, it is likely to put around 400 billion won into the Korean business-to-business service group in aggregate.

Eating away at the market share of the world’s dominant ERP software developer SAP, Douzone expanded its domestic market share to 19.2% in 2019, versus 18.2% in 2018. Its ERP software is being used by around 10,000 companies from both South Korea and China.

Its double-digit annual growth in both operating profit and sales drew the attention of several investment firms. Last year, Douzone received investment proposals from KKR as well as a few Korean financial institutions.

Last year, it earned 76.7 billion won in operating profit on sales of 306.5 billion won.

SHARE PRICE AT HIGHEST IN OVER ONE MONTH

Following the investment news exclusively reported by Market Insight, shares in Douzone climbed to their highest level in more than a month. It was trading 2.73% higher at 113,000 won by Tuesday noon, just off its intraday high of 115,000 won, its strongest level since Jan. 21. Market Insight is the capital news arm of The Korea Economic Daily.

Bain Capital is expected to help Douzone sell its ERP, cloud accounting and other business solutions software to its around 80 portfolio companies, while providing strategy consulting services for global expansion. The Korean company is planning to step up the big data business for global clients, alongside its key business platform and cash cow Wehago.

Further, Bain Capital's experience in investing in leading ERP companies was another reason behind Douzone's choice of the US private equity firm over other funds as a financial investor. Its portfolio includes Australia’s MYOB and Japan’s Works Human Intelligence, from which Bain Capital is believed to have built a good understanding of the ERP business, according to the sources. 

“Bain Capital will be of great help to bolster Douzone’s global capabilities, which has been pointed out as Douzon’e weakness,” said one of the investment banking sources.  

In comparison, Hugel Inc, a Korean botulinum toxin producer, made its foray into China and the US after Bain Capital acquired the Kosdaq-listed firm for 930 billion won in 2017.

Meanwhile, Bain Capital is launching its official Seoul office in the coming months to boost investment in the country. It is also planning to double its Korea-based investment staff to ten.

By Min-ki Koo and Jun-ho Cha 

kook@hankyung.com

Yeonhee Kim edited this article.

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