Wiz Korea touches on two industries—franchising and education—that Riverside targets, and marks Riverside’s second platform investment in Asia. In January it bought Shinsouki, a Niigata City, Japan-based parking lot operator. In April 2007 it opened its first office in Asia, in Tokyo, and in October, it opened an office in Seoul, as previously reported in Buyouts.
The firm was attracted to the company’s strong reputation, quality educational materials and curriculum and, as with its other franchise investments, its recurring revenue, Stewart Kohl, co-CEO, told Buyouts. The deal was less than $150 million.
James Jaehwan Lee founded the Bundang, Korea-based company in 2003. Wiz Korea now has 60 franchises, mostly in Korea but also in Vietnam, China, and the U.S., for children ages two to seven. Its curriculum is focused on play-based learning, which aims to strengthen toddlers’s emotions and intelligence through the development of technical skillsets, and their social skills through interaction with other children. Classes include training in Chinese and English, art, music, mathematics, physical education, yoga, cooking and science.
MVP Partners, a South Korean advisory firm that caught the eye of Riverside Managing Director Jay Kim, brought the deal to Riverside. The firm obtained senior lending from Korea Exchange Bank.
Wiz Korea is the 20th acquisition for Riverside in 2008. Equity for the deal came from its
Kohl estimates the firm will make about 10 platform deals with the Asia fund, the majority of which will be in Japan. Riverside plans to look at deals in Singapore, Malaysia, and potentially, Australia in the future.
Korea is attractive to Riverside because of its abundance of small, private companies—which constitutes the vast majority of Riverside targets—in consumer goods, traditional manufacturing, franchising, and education and training. Its growing middle class—and its respect and demand for quality education—is another positive attribute, Kohl said.
Challenges in the market include creating a reputation as a capable, dependable buyer of quality companies, Kohl said. In some markets in Asia, private equity firms are associated with vulture firms that target distressed companies. “We want to get the word out that we’re buying quality, growing, profitable companies,” Kohl said. “There’s no distressed aspect to what we do.”
Riverside plans to expand the company by finding quality franchisees in the metropolitan areas of South Korea. “The economics of the franchise model show that it provides a high return on investment,” he said.
Stuart Baxter, the managing partner leading Riverside’s expansion in Asia, and Kim, who is based in Seoul, led the deal team for Riverside.