人力资源尽职调查工具
- 1. Investment Due Diligence Assessment23 December 1999
- 2. DisclaimerThe investment opportunity described below has not been recommended or approved by Bain & Company, Inc. or any of its subsidiaries. No representation or warranty is made as to the accuracy or completeness of the information contained 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 51net.com will not be guaranteed by Bain & Company, Inc. or any of its subsidiaries.2Z5112OSF
- 3. AgendaExecutive Summary Detailed Business Assessment US Market Benchmarks China Market Dynamics 51net.com Financials3Z5112OSF
- 4. 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 1999 revenue Current #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 goal Capable management including head of Bain’s China practice and 3 former Bain consultants Realistic business plan targets (in Private Placement Memorandum) with additional upside if timing of adjacent business roll-out (eBay, Buy.com business models for China) is accelerated (business plan financials are 99% driven by core recruiting business)Exposure to potentially significant sovereign risk given China’s unclear regulations on foreign ownership and operation of internet businesses Expected 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 blockbuster (high case: 7.9X return on money, 99% IRR)ProsConsSummary Investment EvaluationExecutive Summary4Z5112OSF
- 5. Executive SummarySource: OneSource; SG Cowen Securities; Analyst Reports; Company Websites51net.com is a China-based start-up company established in 1998 focused on the online recruitment market Its key partner team includes 1 Bain partner (Rick Yan) and 3 former Bain consultants 51net.com is seeking to raise US$3M in exchange for a 5% equity stake in the businessUnderlying China online recruiting market growth and penetration (included in business plan targets) Adjacent e-business opportunities (not included in business plan targets)51net.com has a click-and-mortar business model for job placements, consisting of a newspaper, Career Post Weekly, launched in Oct 1998 a website, 51job.com, launched in Jan 1999 It is currently one of the leading players in each of the high-end multinational recruitment advertising markets of Beijing, Shanghai and Guangzhou 500,000 readership relationship with 5,000 HR managers resume bank has 50,000 subscribers (highly educated professionals and middle managers: relatively affluent, highly paid customer base) 51net.com is targeting growth through a combination of initiatives: growth of core online recruiting business in existing and new city markets embarking on adjacent e-business opportunities to serve its core affluent customer base (ebay, buy.com business models for China) developing 51net.com into an umbrella brand with a strong portfolio of vertical applications establishing an e-commerce business incubatorBackgroundStrategy and business modelInvestment upsideChina-specific legal and regulatory risk Intrinsically low entry barriers Speed in reaching scaleKey risksInvestment Overview5Z5112OSF
- 6. Bain role Business Plan Development Accounting Advisory Board Recruiting Support Creative Seed Funding Temporary Management Technical Fundraising Support Legal Facilities/Space Strategic Partner IntroductionsCriteriaMarket potentialBusiness conceptLeadership opportunityTeamBain value addedBain learning Bain compensationCompany: 51net.comProposed Terms: To invest US$0.5M in exchange for 0.83% equity stake in companyRequired resources: Overview See attachedRecommendation See attachedCurrent investors: Contact/principals: Rick YanXXScoring44442.523.5CommentsChina’s 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 China, 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 media Opportunity to leverage employer and job seeker customer base into adjacent business opportunities51net.com 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 portalsThe senior management team has had several years work experience in China with Bain & Company and have worked together for more than 3 yearsSome potential for Bain case team involvement Relatively low ownership stake (0.83%) yields limited influence on management directionPotential to explore multiple e-business opportunities in ChinaCompared with US and China benchmarks, 51net.com’s pre-money valuation is relatively high Potential to unlock higher valuation multiple long term by spinning off online business in the future However, investment is exposed to considerable China-specific regulatory risk on top of standard operating risk No indication of potential participation in subsequent financing roundsOpportunity ScreenExecutive Summary6Z5112OSF
- 7. ScoringDescriptionCriteria1 ------ 2 ------ 3 ------ 4 ----- 5 <$1B MarketMulti-billion dollar opportunityIs the idea going after a large market opportunity?Market Potential1 ------ 2 ------ 3 ------ 4 ------- 5 BAUReverse auction like innovationDoes the concept create substantial customer value and/or eliminate substantial cost?Business Concept1 ------ 2 ------ 3 ------ 4 ------ 5 Me ToHighly proprietary approach; uncharted spaceCan this company/idea become the market leader? Does it have or could it establish proprietary advantages?Leadership Opportunity1 ------ 2 ------ 3 ------ 4 ------5 Struggle to hireTeam in placeAre there high quality team members involved? Are there resources to go make it happen? Team1 ------ 2 ------ 3 ------ 4 ------ 5 Traditional ConsultingTransformational ImpactCan Bain shape the destiny of this company?Bain Value AddedWill Bain gain valuable experience from this investment?Bain Learning 1 ------ 2 ------ 3 ------ 4 ------ 5Passive Investment Awesome Learning OpportunityPlatformDealWill Bain be fairly compensated for investments and risks?Bain Compensation1 ------ 2 ------ 3 ------ 4 ------ 5NPV = Opportunity CostChance to make $25M+Executive SummaryScreening Criteria7Z5112OSF
- 8. Executive SummaryHybrid vs. Pure Online PlayThe hybrid click-and-mortar business model has several advantages over the pure online plays.Description:Increased certainty of earningsMore stable and certain earnings stream from newspaper business dampens the more volatile and uncertain earnings from the online business barriers to entry higher for newspaper businessGreater customer penetrationIncreased access to customers complementary distribution channels joint branding strategy improves customer recallHigher overall profitabilityUnlike pure online models, the newspaper business is profitable 48% operating margin for Career Post (driven by 5% marketing/sales spend) negative operating margins for 51net.com (driven by 203% marketing/sales spend)8Z5112OSF
- 9. Business Plan TargetsTotal costs: US$4.4M US$7.4M US$11.1M Operating profit: (US$0.2M) US$2.0M US$1.8M Operating margin: (3.8%) 21.7% 13.7% EBITDA: (US$0.3M) US$2.0M US$1.8MNon- recruitment*51job.comCareer PostCAGR (‘00-02)150%50%Source: 51net.com Private Placement MemorandumRevenue (US$M)2000F (Bain Forecast)2000F (Business Plan)2001F (Bain Forecast)2001F (Business Plan)2002F (Bain Forecast)2002F (Business Plan)Executive Summary51net.com’s revenue targets are realistic, based on an evaluation of US benchmark comparables and an assessment of business plan targets -- new adjacent business opportunities are not forecasted to contribute materially to 2000-2002 financials.$4.1M$4.2M$8.8M$9.4M$11.6M$12.8M*Includes all adjacent business opportunities (51buy.com, 51price.com, incubator)9Z5112OSF
- 10. US and China Valuation Benchmarks51net.com’s overall valuation multiple is roughly in line with US online only recruitment benchmarks, although a standalone 51job.com valuation multiple (more apples to apples) is relatively high. However, 51net.com’s valuation multiple is considerably lower than that of China.com, the only NASDAQ listed China internet benchmark.Executive SummaryNote: Price-to-sales multiple for Career Post, 51job.com and 51net.com based on year 2000 projections (price is pre-money valuation); All other price-to-sales multiples based on December 10, 1999 market capitalization and 1999 forecast revenue (Q1-3 actual, Q4 forecast) Source: Company Financials; 51net.com Private Placement MemorandumOnline Recruitment Price-to-Sales Multiples Internet Portal Multiple (China vs. US)Price-to- Sales MultiplePrice-to- Sales MultipleMarket capitalisation: $1,141M $146M $150M Revenue: $16M $7M $14M10Z5112OSF
- 11. Investment RisksExecutive SummaryChina internet regulatory riskCurrently, regulations on foreign internet participation in China are unclear officially, up to 49% foreign ownership is allowed but active foreign operating involvement is prohibited unofficially, significant foreign operating involvement is already in place in many e-business ventures Impact of WTO should be positive, but initial MII reactions have not been positive under WTO, up to 49% foreign ownership and active foreign operating involvement is allowed however, Minister Wu of MII has advocated a clampdown of foreign participation without specific details Several ministries aiming to control internet regulations with the Ministry of Information and Industry (MII) emerging as the leading regulator 51net.com partners are comfortable with China risks based on multiple discussions with senior government officials Chinese title law not well developed physical and intellectual property not well protectedIntrinsically low entry barriersPotential entry by internet portals or online newspaper (in classified section) low capital investments required subscriber base already established However, Career Post business has higher entry barriersSpeed in reaching scaleTrading off short-term profitability for long-term market dominance high customer acquisition cost Ability to lock up alliances with major portals ahead of competitorsThe investment in 51net.com is not without risks.Standard operating risks11Z5112OSF
- 12. Pre and Post-Money ValuationPost money value addedPre Money Valuation$36M$57M51net.com 2000 Sales: $4.25M $4.1M $4.1M 51net.com blended Price-to-sales multiple*: 13.4x 9.5x 8.5x 51job.com price-to-sales multiple: 38x 16x 11xSource: 51net.com Private Placement Memorandum; Bain Analysis Note: 51net.com price-to-sales blended multiple based on varying price-to-sales multiples of 51job.comPre-Money: 8.3% Post Money: 7.7%Pre-Money: 5.3% Post Money: 5.0%$3M investment being raisedExecutive SummaryPre-Money: 7.5% Post Money: 6.9%*Price-to-sales multiple based on year 2000 projections$40M51net.com’s valuation is on the high end, driven by the high price-to-sales multiple of its online recruitment business.12Z5112OSF
- 13. Potential ReturnsLow Case:Post-money ValuationUS$60MYear 2002 ValuationRevenue US$7.85M from Career Post US$4.82M from 51job.com Price-to-sales multiple 4x for Career Post 20x for 51job.com3 Year Return2.2xAssumptionsValuationReturn on MoneyIRR29%US$130MThe expected returns are attractive but not blockbuster.Executive SummaryBase Case:US$60M3.8x57%US$230MRevenue US$7.85M from Career Post US$4.82M from 51job.com Price-to-sales multiple 6x for Career Post 38x for 51job.comHigh Case:US$60M7.9x99%US$475MRevenue US$7.85M from Career Post US$4.82M from 51job.com US$6M from adjacent e-businesses Price-to-sales multiple 6x for Career Post 38x for 51job.com 38x for adjacent e-businesses13Z5112OSF
- 14. AgendaExecutive Summary Detailed Business Assessment US Market Benchmarks China Market Dynamics 51net.com Financials14Z5112OSF
- 15. US Internet Penetration and Online Recruitment Forecast (1998-2002F)US Market BenchmarksThe US online recruiting market is projected to be US$1B in 2002.Source: IDC; Goldman Sachs Research; Euromonitor; Forrester Research; Bain EstimatesInternet Penetration (%)Online Recruiting Spend (US$ M)Online Recruiting Spend CAGR (1998-2002E) 79%15Z5112OSF
- 16. Pricing Models: US MarketsSource: Competitor Websites; Industry Analyst Reports; Interbiznet; Forrester Research; Bain AnalysisMost of the leading online job search sites in the US offer high margin Job Board services, accounting for the bulk of online recruitment revenues.US Market BenchmarksDescription:Estimated market size (1998):Key players:Job BoardRecruiters are charged for each job posted on recruiting site/ networkUS$85MMonster.com CareerBuilders.com Career.com Headhunter.com Dice.com Careermosaic.com Wsj.career.comSubscriptionRecruiters are charged a flat fee per time period for posting jobs on recruiting site/networkUS$16MHotjobs.com Recruitersonline.comUpgradeRecruiters are charged an upgrade premium so that they can increase the exposure of their jobs (listed at the front of any search)US$5MHeadHunter.com*Based on 1998 financialsTypical pricing:$20-200 per job per month (average of $100 per job per month)$1,000 per year for unlimited job postings$25-$75 premium per job per monthTypical gross margin*:75%85%98%Basic ChargesAdditional ChargesTarget pricing model of 51job.com16Z5112OSF
- 17. US Online Recruitment Examples*As of 10 December 1999Targeting profitable customers and having a strong market position are key to the success of online recruitment businesses in the US.US Market BenchmarksTarget Market:Market position:Hotjobs.com#1 choice for corporate recruiters100,000 job postings 2,520 clientsHeadHunter.com#1 site among individuals in the $75K-$100K annual income bracket #3 player in mass market online recruitment175,000 job postings 1,104 clientsCareerBuilders.comMass market recruiting #5 player in mass market online recruitment100,000 job postings 870 clientsGross margin 1999 Revenue/client Sales and marketing spend/revenue85% US$4,800 88%98% US$4,800 245%75% US$13,908 182%Financial Measures (1999):Valuation: (Price-to-sales multiple*)71x21x 11xPartnerships:NoneProvides content to strategic partners such as PeopleWeb Communications and justsell.comPartnership with Microsoft to launch career channel on MSN; agreement with several Lycos Network membersGross margin 1999 Revenue/client Sales and marketing spend/revenueSource: Competitor Websites; Industry Analyst Reports; Company Financials17Z5112OSF
- 18. Recruitment Business Value ChainFor Corporate customer:For Job seeker:Customer acquisitionDevelop network of corporate customers Build strong relationships with HR managersBuild resume databaseMatchmakingAdvertise quality of resume databaseAdvertise quality of corporate customers Tie up with internet portals/newspapersServicingExpand product and service offering HR website management executive searchExpand product and service offering job seeker virtual community career development information servicesWallet deepeningCustomer loyalty programs Adjacent business opportunitiesCustomer loyalty programs Adjacent business opportunitiesActivities:Relationship managementIncreasing differentiation and barriers to entryUS Market BenchmarksHaving access to a resume database and matchmaking job seekers with corporates are only the first steps in the online recruitment business value chain.Benefits:Increased number of job postingsIncreased number of job postingsIncreased customer loyalty Increased job seeker churnIncreased customer loyalty Increased revenue/ customer51net.com and key China competitors’ current capabilitiesSource: Literature Searches18Z5112OSF
- 19. Key Success FactorsDescription:Performance measures:Examples:High employer retentionHigh number of repeat customers (employers) using services from year to year Strong relationships with recruiters and job huntersPercentage repeat customers Revenues/customerHotjobs.comQuality resume databaseEffectively maintain and leverage high quality job-seeker resume base, providing for the best recruitment results for both employers and job-seekersNumber of reputable corporate customers Percentage successful placementsHotjobs.com HeadHunter.comExclusive partnershipsAgreement with portals and/or business sites to be the exclusive provider/advertiser of job search products and servicesNumber of eyeballs Number of job postingsCareerBuilders.com Monster.com HeadHunter.comUS Market BenchmarksThe success of online recruitment has been attributed to three key success factors.19Z5112OSF
- 20. AgendaExecutive Summary Detailed Business Assessment US Market Benchmarks China Market Dynamics 51net.com Financials20Z5112OSF
- 21. Source: IDC; Goldman Sachs Research; Euromonitor; Forrester Research; Bain EstimatesInternet Penetration (%)Online Recruiting Spend (US$ M)Internet Penetration (%)Online Recruiting Spend (US$ M)Online Recruiting Spend CAGR (1998-2002E)Online Recruiting Spend CAGR (1998-2002E)79%104%US Market China Major Cities (Beijing, Shanghai and Guangzhou)China Market DynamicsUS and China Internet Penetration and Online Recruiting Forecast (1998-2002F)The China online recruiting market is projected to be US$25M in 2002, a fraction of the US market size. Based on business plan projections, this implies a ~20% market share for 51job.com21Z5112OSF
- 22. Internet User SegmentationSource: CNNIC ReportChina Market Dynamics51net.com’s target customer segments51net.com’s online recruiting business model is targeting the majority of China’s internet users.22Z5112OSF
- 23. Recruitment Website CharacteristicsSource: Website SearchTypeJob Agency WebsiteThere are 3 types of recruitment websites in China.CharacteristicsNo. of WebsitesExampleHR Website Classified AdvertisementRecruitment is main content Privately owned company Mainly managerial, technical jobs Provide job opportunities in big cities Some are related to the head hunters Recruitment is main content Sponsored by government Non-profit organization Low profile job recruitment service Personnel document management service included Focus on regional labor marketInternet content provider Recruiting is minor portion of their content Business website, local city website and industry website are included 51job.com Zhaopin.com www.Work-job.Com (Xian Talent Market) job.iii-net.com (Wuxi Talent Market) www.tjrc.com.cn (Northern China Talent Market) 485868263.net hubeimarket.com.cnChina Market Dynamics23Z5112OSF
- 24. China Online Recruitment Competitor Market Share by Geography (1999)Source: 51net.com Private Placement Memorandum51net.com is currently the #1 or #2 player in Beijing, Guangzhou and Shanghai.China Market Dynamics24Z5112OSF
- 25. Online Recruitment Competitor ProfilesSource: Website SearchChina-HR.comZhaopin.comCjol.comInvestorJob Availability*Customer ReactionPosition ProvidedCompany ServedBusiness ModelPartnerse-channel Management Consulting CompanyShenzhen CJOL Human Resources Co, LTDManagerial, Technical StaffManagerial, Technical Staff45181313 resumes accepted currently, 34067 accepted resumes accumulatedManagerial, Technical Staff Alliance Consulting Ltd.2830452259687 registered individualsBoth foreign companies and local companies, mainly high profile jobsFocus on MNC and Hi-tech companies 228 companies served6807 companies registered Both local companies and foreign companiesCombination headhunting website recruitment service job magazineCombination website recruitment service headhunting e-commerceCombination headhunting website recruitment service job magazine BBSSohu.com41 partners including Sohu, Netease,Sina and 263Net12 partners including Yahoo China, Netease,263NetChina Market Dynamics*As of 20 Dec 199925Z5112OSF
- 26. Online Recruitment Relationship with Portals51net.com and its competitors have relationships with several of the most leading portals in China -- however, no competitor has been able to lock up exclusive relationships51jobChina-HR:CJOL:Number of HomepagesCooperative RelationshipsZhaopin:Note: CNNIC-China National Network Information Center; 9,906 web sites in survey Source: July 1999 CNNIC Survey of 52549 users; Bain Phone InterviewsChina Market DynamicsCustomer Survey of Home Page Usage (N=9,906)26Z5112OSF
- 27. Cooperative Relationship DetailsPortalsRecruitment.comDealExclusivitySohuChina-HR.com 51Job.com Zhaopin.comShares .coms’ recruiter database Provides banner areas Count clicks to .coms Low or no charges to .comsNoNeteaseChina-HR.com 51Job.com CJOL.comShares .coms’ recruiter database Provides banner areas to .coms Highlights significant recruiters Count clicks to .coms Low or no charges to .comsNoYahoo ChinaChina-HR.com 51Job.com CJOL.com Zhaopin.comClassified advertisementNoSource: Bain Phone InterviewsChina Market DynamicsNo competitor has locked up exclusive portal relationships.27Z5112OSF
- 28. Profile: Key PortalsSource: Web Site SearchPortalsBusinessEstablishmentPage View (a day)Recruitment Com. PartnershipRecruitment ServiceRankingsSina.comSohu.com263.comNeteaseGlobal Chinese ICPISP/ ICPICPGlobal Chinese ICPDecember 1998February 19971998May 19972.8 million2 million450 KN/AChina-hr.comChina-hr.com 51job.com Zhaopin.comScience.hr.com China-HR.com Zhaopin.com China Talent.comChina-hr.com Cjol.comNoNoYesNo1235China Market DynamicsCurrently, only one of the major China portals offers its own online recruitment service -- however, the entry barriers are low, and therefore, future participation by the portals is not inconceivable28Z5112OSF
- 29. AgendaExecutive Summary Detailed Business Assessment US Market Benchmarks China Market Dynamics 51net.com Financials29Z5112OSF
- 30. 51net.com’s projected revenue for the first three years of growth is realistic compared with US benchmarks. Its expected profitability over the same period is also reasonable given that hybrid customer acquisition costs are lower than that of pure online plays (Career-Post has a lower cost acquisition model).51net.com Projections (Hybrid business model)Hotjobs.com (Pure online play)CareerBuilders.com (Pure online play)Source: 51job.com Business Plan; Industry Analyst Reports; Company Financials51net.com FinancialsRevenue/Profit Trajectory ComparisonNo. of Customers: 3,451 5,722 6,906 2,520 870 Revenue/Customers (US$): 1,217 1,643 $1,853 $4,802 $13,908 Gross Margin (%): 63% 72% 72% 97% 85% NA 74% 84% 76% Operating Margin (%): -4% 22% 14% -238% -63% NA -1,748% -386% -172% Marketing/Sales Ratio: 0.45 0.35 0.41 1.08 0.88 NA 9.64 3.35 1.82Revenues/costs Operating profitCAGR74%CAGR316%CAGR737%($0.2M)$2.0M$1.8M($0.6M)($1.5M)($13.2M)($2.5M)($7.4M)($12.0M)RevenueCOGSMarketingOther CostsRevenueCOGSMarketingOther CostsRevenueCOGSMarketingOther Costs30Z5112OSF
- 31. 51net.com Revenue DriversRegional:Beijing 21% Shanghai 38% Guangzhou/Shenzhen 27% North China 3% East China (ex Shanghai) 6% South China (ex GZ/SZ) 5%Non RecruitmentCareer Post51job.com# major accountsRevenue/accounts# major accountsGeneral accountsMarket shareAd VolumeAverage price per pageAd revenue per monthSearch revenue per month# enterpriseCustomer penetrationAverage revenue per customer1,034 (0)80% (0)6 (0)70K RMB (15%)300K RMB (63%)200K RMB (79%)103K RMB (0)5% (158%)1K RMB (0)Sellable page views per day (annualized)Sellable ad per pageAd pricingUtilization150K per day 154.75 m/year25020%Revenue38%61%1%99%1,600 (2%)80% (8.5%)16 (9%)55K RMB (11%)300K RMB (114%)200K RMB (79%)231K RMB (0)5% (158%)1K RMB (0)1,600 (89%)80% (87%)16 (89%)50K RMB (71%)200K RMB (227%)150K RMB (486%)126K RMB (0)3% (from 0)1K RMB (0)2002 Targets (CAGR 00-02)XXXBeijingShanghaiGuangzhou/ Shenzhen51net.com FinancialsKey drivers of business plan revenue targets31Z5112OSF
- 32. 51net.com Cost DriversDirectIndirectCareer Post51job.comCost68%32%Sales taxMarketingCustomer ServiceT&EOfficer SalaryOtherPrintingOtherHardware/serverSoftware/ maintenanceProduction/ data entry33%49%18%45%55%48%67%10%5%5%13%Marketing comprises 46% of total operating costs -- this is lower than other pure-online players who do not have the same cost leverage as 51net.com’s hybrid click and mortar business model51net.com Financials43%9%32Z5112OSF
- 33. Financial Targets: Bain Adjustments51net.com FinancialsAdjustmentsImpact on Business Plan ForecastCustomer Penetration*: 2000 2001 2002 Beijing 0.75% 0.375% 3% 1.5% 5% 2.5% Shanghai 0.75% 0.375% 3% 1.5% 5% 2.5% Guangzhou/ 0 0 0.75% 0.375% 3% 1.5% Shenzhen51job.com Sales Forecast (US$M) 2000 2001 2002 Business Plan 0.8 2.8 4.8 Bain Estimate 0.6 2.2 3.6 Implied Market Value/Sales Multiple 37.8X 10.1X 6.1X Implied Multiple 48.7X 13.3X 8.1X (Bain)*Customer penetration defined as number of revenue customers divided by total number of enterprises33Z5112OSF
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