American private investment firm Bain Capital sold its stake in South Korean enterprise resource planning (ERP) company DOUZONE BizOn to Shinhan Securities, recouping its investment. However, the returns fell short of expectations, as the focus shifted towards capital recovery due to setbacks in DOUZONE BizOn’s initial goal of global expansion.
DOUZONE BizOn disclosed on April 29 that its second-largest shareholder Bain Capital had completed the selling of 3,035,552 shares (9.99%) to a special purpose corporation (SPC) of Shinhan Securities through a block deal. Shinhan Financial Group’s involvement in this investment seems aimed at strengthening cooperation with DOUZONE BizOn. DOUZONE BizOn is a company that provides ERP software for internal corporate functions such as payroll management, accounting, and logistics. Currently, it is pursuing the establishment of a direct bank and announced plans in early April to form a consortium with large commercial banks, policy institutions, and major corporations as shareholders.
Bain Capital seems to have only realized a profit of around 30 billion won over three years. In 2021, Bain Capital invested a total of 230 billion won in DOUZONE BizOn and its parent company, DOUZONE Holdings. After DOUZONE BizOn absorbed DOUZONE Holdings at the end of last year, Bain Capital acquired 3,115,522 shares of DOUZONE BizOn. Of these, 3,035,552 shares were sold this time. Even considering dividends, Bain Capital is estimated to have pocketed around 260 billion won.
Based on this, the calculated annual internal rate of return (IRR) is in the 4% range, equivalent to the interest rate on a three-year fixed deposit in the tier-1 capital. In the private equity industry, an IRR of over 8% is typically considered the benchmark for successful investment, which this falls short of. An industry insider commented, “While it’s not a loss, considering the cost of capital, labor, opportunity cost, etc., an IRR in the 4% range essentially just covers the principal.”
Bain Capital has had many successes in Korea, including investments in companies like Classys, Hugel, and ST Unitas. The reason Bain Capital was satisfied with preserving just the principal this time is attributed to DOUZONE BizOn’s focus on domestic operations, unlike at the time of investment in 2021. At the time of investment, DOUZONE BizOn was planning to pursue global big data business but withdrew the plan in favor of enhancing its core competitiveness. This was due to the deterioration of performance among major clients, platform companies, after the end of COVID-19 pandemic.
A Bain Capital spokesperson said, “As there are confidentiality clauses, we cannot disclose the background of the sale.”
