Bain serves up Skylark in Tokyo IPO

Despite the drawbacks, Bain - which already had exposure to the sector through Dominos Japan - remained keen on the business and confident it could unlock more value. It eventually bought a 100% stake in the business from Nomura Principal Finance for JPY160 billion ($2.1 billion).

"We have had a lot of experience in the retail and restaurant sector and in Skylark we saw a very well-positioned business, but one that had a lot of opportunities to be run better," explains David Gross-Loh, managing director with Bain in Japan. "The original team was a solid, but we felt we wanted to take it from a leading Japanese player to a business that could perform on a global level, so the first step was building the management."

The PE firm's first move was to bring in Ralph Alvarez, former global president and COO of McDonald's Corporation as chairman. It further bolstered the management team with executives from the likes of Starbucks and Uniqlo. The second stage was to focus on customer service, in particular addressing issues with waiting times and consistency in the quality of food preparation across the outlets.

"We implemented a bunch of standards and tracking metrics - things you would commonly see in the US - to increase productivity and reduce wait times, particularly at peak hours. We also reconfigured tables so people could be seated more quickly," says Gross-Loh.

The strategy seemed to pay off, with the company reporting improved customer satisfaction scores and seeing steady same store sales (SSS) growth for the first time in several years. It was this, plus the positive performance of the Japanese equities markets in the wake the country's economic reforms, that prompted Bain's decision to the take the company's public.

Skylark sold 62.6 million shares - including an overallotment option of 7 million shares - at JPY1,200 apiece, the bottom end of the indicative range. Bain's stake fell from 97.7% to 66.1% as it took the opportunity to realize JPY68.8 billion from the investment. Skylark dropped 5% on its first day of trading on October 9. The stock is yet to recover, having last traded at JPY1,138, but Gross-Loh remains optimistic, saying there is a lot more work to do.

"We have spent the last couple of years getting the fundamentals strong again and now we are looking at growing our footprint," he explains. "We think there is a sizeable opportunity in Japan to open new stores and we have identified around 1,000 new locations. The return on the economics for a Skylark store is very attractive - around 20-30% - so that is going to be another piece of our growth story."

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

• Topics
• Consumer
• Buyouts
• Exits
• North Asia
• Consumer
• Bain Capital Asia
• Exit
• IPO
• buyout
• Japan