Bain makes part-exit as Japan's Bellsystem24 goes public

Bellsystem24 sold approximately 32.5 million shares - including 3.1 million new shares - at JPY1,478 apiece. The stock opened flat and was at JPY1,405 as of mid-afternoon trading on November 20. Bain exited 24.5 million shares, reducing its holding to 14.5% from 50.1%. Itochu Corporation, which bought a 49.9% stake in Bellsystem24 last year, sold 4.9 million shares and now has 41.1%.

Should the overallotment option be fully exercised, Bain and Itochu would sell a further 4.06 million and 812,600 shares, respectively.

Bain acquired Bellsystem24 from Citigroup Capital Partners Japan for JPY100 billion (then $1.16 billion) in 2009. The company is a customer relationship management (CRM) outsourcing business built on a call center model, with various complementary services including e-commerce support, research and marketing, analytics and information technology.

The first two years were spent stabilizing the business. David Gross-Loh, a managing director at Bain, notes that at the time of investment, Bellsystem24 was without a CEO, had a lot of customers that were not generating profit, and was seeing flat revenues while the industry as a whole was expanding at 3-5% a year.

After rationalizing the customer base and shoring up management - EBITDA margins increased from 4-5% to 12% - the focus became changing the operating model. Bellsystem24 was run on a cost-plus-pricing basis, which meant the customer was paying for an agent who was only answering calls 50% of the time. Bain wanted to move to a performance-based approach.

"We wanted to change the model for delivery within a call center to more of a performance-based higher-value offering," Gross-Loh said. "That is not offered by Japanese call center companies but it is part of the fabric of global call center companies. You are only really going to find that knowledge outside of Japan."

To this end, David Garner, who had substantial experience running CRM businesses in the US, was brought in as chairman. He led the transition internally and also brought customers around to the new way of working. The first adopters were multinationals and then the domestic customers followed.

Bellsystem24 now has 25 operation centers nationwide and works with customers across a variety of industries. The company posted revenue of JPY112.1 billion for the 2015 financial year, up from JPY107.6 billion in 2014. Net profit rose to JPY9.87 billion from JPY8.02 billion over the same period.

Garner identifies four major growth drivers. In addition to building its domestic customer base in the traditional sense, the company wants to leverage the Itochu relationship and bring in more business from the conglomerate's subsidiaries. Garner said that Itochu has identified 5,000 seats of call center business that is currently being done internally or outsourced to another provider.

Bellsystem24 is also broadening its product offering to include a suite of cloud-based technology services that offer higher margins than the traditional call center business and it is expanding operations into Southeast Asia. Contracts have already been secured in Thailand and Indonesia and the company is working on an acquisition in Vietnam.

"They have about 3,000 people doing work for Vietnamese companies and the margin is similar to what we get in Japan," Garner said. "We are going to create a service offering for offshore English that will have a 20% price advantage over the Philippines."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Exits
• Technology
• Support services
• North Asia
• Japan
• Bain Capital Asia
• Exit
• IPO
• Technology
• professional services