Douzone Bizon Co., South Korea’s leading homegrown enterprise software firm and the country’s No. 2 player in the enterprise resource planning (ERP) market, is searching for a new owner. The move comes as global buyout firms are seeking to acquire digital infrastructure assets riding the artificial intelligence boom.
Kim Yong-woo, chairman and founder of the Kospi-listed company, has hired advisers to sound out potential buyers for his entire 21.51% stake or a partial holding, people close to the matter said on Wednesday.
The chairman’s stake is worth some 470 billion won ($340 million) based on the stock’s market capitalization of 2.2 trillion won as of Wednesday.
Sweden’s EQT Partners, one of Europe’s largest private equity firms, is among a shortlist of five Korean and global buyout groups that have been approached, sources said.
While no sale structure has been finalized, negotiations are centered on a deal that would hand over management control to the buyer, according to the sources.
Sources said the Douzone chief hopes to capitalize on soaring valuations of business software firms amid surging investor interest in AI applications.
The sale could also bring fresh capital and a global network to help Duozone Bizon push beyond its domestic customer base of small- and mid-sized Korean enterprises.
DIFFERENCES ON FAIR VALUE
Price expectations between the seller and prospective buyers are said to be far apart.
Suitors are known to value the stock at about 60,000 won per share, while Kim is seeking more than 100,000 won per share — a valuation that would imply a hefty premium to its current trading range.
Douzone Bizon closed down 5.7% at 72,200 won on the Kospi market.
Douzone Bizon operates Korea’s largest locally developed ERP platform, serving as a critical digital backbone for Korean SMEs.
With a 16.6% domestic ERP market share, it trails only German enterprise software giant SAP, which commands a 20.5% share.
The Korean ERP developer and cloud service provider generates about 400 billion won in annual revenue with an operating profit margin in the 20% range, making it a highly profitable mid-market target.
The company has also built a broader software and information technology services ecosystem through affiliates such as Kicom, an electronic fax service provider; Douzone ENH, a corporate training and English teaching unit; and Douzone B&F, an information services provider.
Last year, Douzone Bizon completed a reverse merger with its holding company, Duozone Holdings, to simplify its ownership structure.
BENCHMARKED AGAINST SAP
Analysts said Douzone’s limited overseas presence and SME-centric model leave ample room for value creation under new ownership, especially one with global reach.
Sources said EQT’s prior investment in Swedish enterprise software firm IFS AB in 2020 has made it a natural contender for Douzone’s stake.
Duozone launched its in-house AI solution ONE AI last year, seeking to ride the wave of corporate adoption of AI tools.
The company is often benchmarked against SAP, which has seen its valuation surge as it embeds generative AI in enterprise tools — a strategy that recently made SAP the most valuable listed company in Europe.
Yet Duozone’s attempts to globalize have faltered.
In 2021, it attracted 300 billion won in equity investment from global private equity firm Bain Capital to back its overseas expansion.
Its planned overseas push, however, was shelved after a post-pandemic growth slowdown in 2022. Bain has since exited its position.
REGULATORY HEADWINDS
Regulatory headwinds may also complicate Douzone’s stake sale.
The recently inaugurated Lee Jae-myung administration has pledged to tighten oversight of M&A transactions involving listed companies to ensure greater protection for minority shareholders.
That raises the risk that a high-premium buyout could trigger criticism if the same price is not offered to retail investors.
Still, with a unique foothold in Korea’s ERP market, a sticky client base and emerging AI capability, Duozone Bizon could present a rare opportunity for global funds seeking exposure to digital transformation in Asia, analysts said.
By Eun-kyung Song, Jun-Ho Cha and Jong-Kwan Park
norae@hankyung.com
In-Soo Nam edited this article.
