Leveraging Carlyle’s industry expertise and global network, Broadleaf has revamped its strategy, transformed its business model from a single package provider to a network solution provider and become a public company with expanded business and global footprint.
About Broadleaf and the Transaction
In November 2009, Carlyle acquired Broadleaf Co., Ltd., by purchasing all shares held by ITX and Olympus. In March 2013, Carlyle exited the investment through an initial public offering on the first section of the Tokyo Stock Exchange, selling its remaining 87% stake in Broadleaf including the completion of over-allotment option in April 2013. Together with the 13% stake sold to strategic alliance partners prior to IPO, Carlyle fully exited from the investment.
Broadleaf is the industry leader of auto aftermarket business solutions, mainly providing mission-critical B-to-B software packages to auto repair and inspection factories. Headquartered in Tokyo, Broadleaf had 36 sales branches across the nation with 887 employees as of December 31, 2012.
Broadleaf has three business lines: (1) Package System Solutions, (2) System Support, (3) Network Services. The Package System Solutions segment, with a uniquely developed auto parts database, mainly provides mission-critical B-to-B software to repair and inspection garages or auto parts wholesalers. While the System Support segment generates stable recurring fee charge, Broadleaf saw the Network Service segment that provides network based information service as the growth driver, and decided to conduct an MBO with Carlyle to realize this opportunity.
Key Value Creation Metrics
During Carlyle’s ownership period, Broadleaf recorded strong growth in its financial performance:
- Sales and EBITDA increased by 8% and 28% respectively
- EBITDA margin improved from 19% to 23%
- Network Service segment registered strong growth, with revenue increased by 63% or CAGR of 17%
Major Valuation Creation Initiatives
Taking Immediate Actions to Implement Changes
As the partnership began, Carlyle professionals and Broadleaf’s management team acted swiftly to develop a 100-day plan outlining key strategic initiatives for business growth. Broadleaf focused on strengthening management team, recruiting middle management, improving sales force efficiency and cost management, preparing IPO and introducing incentive plan. The immediate actions to revamp the company’s strategy led the company towards further growth and success.
Strengthening Management to Support Business Growth
Led by CEO Mr. Oyama who has a great track record and vision, Broadleaf was well-positioned for continued growth. To further support the company’s strategic development, Carlyle assisted Broadleaf in recruiting experienced senior executives including a Chief Financial Officer, a Chief Strategic Officer and a Chief Technology Officer. Carlyle also brought in Mr. Kizawa, a former CEO of Autodesk Japan, as an external board member of Broadleaf, leveraging his industry expertise to support the company’s growth. The new CFO, CSO and CTO and executive board member played an important role in driving cultural change and leading the implementation of business improvement initiatives.
Enhancing Operations and Implementing Cost Reduction Efforts
With Carlyle’s assistance, Broadleaf introduced a number of initiatives to improve the sales force efficiency. By conducting comprehensive analysis of its customer base and implementing effective strategies, Broadleaf nearly doubled the sales per person during Carlyle’s investment period. Carlyle also helped the company reorganize the research and development function, standardize the common modules of the software, and streamline operations, which allowed the company to focus on value-added work such as product planning, design and quality control.
Expanding Fee-Based Business and Global Footprint
Supported by Carlyle, Broadleaf expanded its Network Service segment and launched a strategic product, an electronic data interchange service connecting each auto aftermarket player online. In addition to new product development, Broadleaf continued to expand fee-based business generating revenue growth in the recycled auto parts marketplace, which now has the largest market share in the industry. To accelerate the penetration of the service, the company introduced a tablet-based product called “CarpodTab” for auto repair and inspection factories, enabling them to upgrade their services to end customers. Leveraging its global expertise and network, Carlyle also helped Broadleaf establish a wholly-owned subsidiary and a joint venture with a Chinese partner to enter into the Chinese auto aftermarket.