1、Investment Due Diligence Assessment,23 December 1999,2,Z5112OSF,Disclaimer,The investment opportunity described below has not been recommended or approved byBain&Company,Inc.or any of its subsidiaries.No representation or warranty is made as to the accuracy or completeness of the information contain
2、ed in this memorandum.Oliver Stratton and Jim Hildebrandt are distributing this memorandum in their individual capacities and not as representatives of Bain&Company,Inc.or any of its subsidiaries.Any investment in will not be guaranteed by Bain&Company,Inc.or any of its subsidiaries.,3,Z5112OSF,Agen
3、da,Executive SummaryDetailed Business AssessmentUS Market BenchmarksChina Market D Financials,4,Z5112OSF,Attractive online recruitment market space in China with high growth potential Differentiated click-and-mortar business model(online and newspaper)with a 16 month operating history and US$1M in 1
4、999 revenueCurrent#1 or#2 position in 3 key city markets(0.7 RMS in Beijing,5.5 RMS in Shanghai and 0.3 RMS in Guangzhou)No competitor has locked up exclusive relationships with key portals-maintaining#1 or#2 position appears to be a realistic goalCapable management including head of Bains China pra
5、ctice and 3 former Bain consultantsRealistic business plan targets(in Private Placement Memorandum)with additional upside if timing of adjacent business roll-out(eBay,B business models for China)is accelerated(business plan financials are 99%driven by core recruiting business),Exposure to potentiall
6、y significant sovereign risk given Chinas unclear regulations on foreign ownership and operation of internet businessesExpected investment returns based on business plan forecasts and comparable US online recruitment valuation multiples are attractive(base case:3.8X return on money,57%IRR),but not b
7、lockbuster(high case:7.9X return on money,99%IRR),Pros,Cons,Summary Investment Evaluation,Executive Summary,5,Z5112OSF,Executive Summary,Source:OneSource;SG Cowen Securities;Analyst Reports;Company Websites,is a China-based start-up company established in 1998 focused on the online recruitment marke
8、tIts key partner team includes 1 Bain partner(Rick Yan)and 3 former Bain is seeking to raise US$3M in exchange for a 5%equity stake in the business,Underlying China online recruiting market growth and penetration(included in business plan targets)Adjacent e-business opportunities(not included in bus
9、iness plan targets),has a click-and-mortar business model for job placements,consisting of a newspaper,Career Post Weekly,launched in Oct 1998a website,launched in Jan 1999 It is currently one of the leading players in each of the high-end multinational recruitment advertising markets of Beijing,Sha
10、nghai and Guangzhou500,000 readershiprelationship with 5,000 HR managersresume bank has 50,000 subscribers(highly educated professionals and middle managers:relatively affluent,highly paid customer base)is targeting growth through a combination of initiatives:growth of core online recruiting busines
11、s in existing and new city marketsembarking on adjacent e-business opportunities to serve its core affluent customer base(ebay,business models for China)developing into an umbrella brand with a strong portfolio of vertical applicationsestablishing an e-commerce business incubator,China-specific lega
12、l and regulatory riskIntrinsically low entry barriersSpeed in reaching scale,Investment Overview,6,Z5112OSF,Bain roleBusiness Plan DevelopmentAccountingAdvisory BoardRecruiting SupportCreativeSeed FundingTemporary Management TechnicalFundraising SupportLegalFacilities/SpaceStrategic Partner Introduc
13、tions,Criteria,Market potential,Business concept,Leadership opportunity,Team,Bain value added,Bain learning,Bain compensation,Company:,Proposed Terms:To invest US$0.5M in exchange for 0.83%equity stake in company,Required resources:,OverviewSee attached,RecommendationSee attached,Current investors:,
14、Contact/principals:Rick Yan,X,X,Comments,Chinas internet growth potential is very high given its current embryonic stage(internet penetration from 4%in 1998 to 16.5%in 2002)In the US,the online recruiting market is one of the most successful B2C business models(US$265M market revenue in 1999)In Chin
15、a,the online recruiting market is in early stages but the underlying potential is high(opportunity to improve currently inefficient recruiting processes/channels),Unique click-and-mortar business model with newspaper and online mediaOpportunity to leverage employer and job seeker customer base into
16、adjacent business opportunities,is currently#1 or#2 in Beijing(0.7 RMS),Shanghai(5.5 RMS)and Guangzhou(0.3 RMS)No competitor has locked up exclusive relationships with leading China portals,The senior management team has had several years work experience in China with Bain&Company and have worked to
17、gether for morethan 3 years,Some potential for Bain case team involvementRelatively low ownership stake(0.83%)yields limited influence on management direction,Potential to explore multiple e-business opportunities in China,Compared with US and China benchmarks,s pre-money valuation is relatively hig
18、hPotential to unlock higher valuation multiple long term by spinning off online business in the futureHowever,investment is exposed to considerable China-specific regulatory risk on top of standard operating riskNo indication of potential participation in subsequent financing rounds,Opportunity Screen,Executive Summary,7,Z5112OSF,Executive Summary,Screening Criteria,8,Z5112OSF,Executive Summary,Hybrid vs.Pure Online Play,The hybrid click-and-mortar business model has several advantages over the pure online plays.,