Nordian Capital buys J-Club, the retail success story you didn't know
Nordian hired YieldDD to evaluate how J-Club's software contributes to its success.
Chances are that you have bought several items from their shops over the years, but you have never heard of the company that operates them. J-Club is a leading shop-in-shop merchandiser of fashion jewellery, hair accessories, sunglasses and greeting cards with around 11.500 points-of-sale in 22 European countries. Its impressive growth - J-Club was founded in 2010 and sold its millionth product within the first year of business - caught the eye of Nordian Capital, the Amsterdam-based private equity firm. Surely J-Club must have been doing something right, so Nordian hired YieldDD to evaluate how J-Club's software contributed to its success.
The backbone of the company
Look beyond the everyday character of its merchandise and it soon becomes clear that J-Club runs a sophisticated, data-driven operation. It assumes end-to-end responsibility for product categories, from sourcing to sales, and closely monitors the supply chain in between. J-Club is able to do this with great efficiency thanks to what it calls 'the backbone of our company': its completely in-house developed portal that is used to collect data from all sales points. The ongoing addition of new categories and retail partners and the rapid expansion into new countries are all facilitated by this application.
Score at least a 9
In the highlight review that YieldDD did, all findings indicated that the quality of J-Club's software was at the level where it should be. "If you run such a software-heavy company, you can't score 6 out of 10. You have to score at least a 9", says YieldDD's Marco van Os. "It was obvious from everything we looked at - from team quality to the amount of technical debt to the release cycle for new software versions - that J-Club itself is fully aware of this."
An increasingly hot topic in M&A
One area though required a closer look. The transaction risk insurer that backed Nordian in this deal requested an in-depth investigation of any open source risks, in addition to the highlight review. What open source software [OSS] does J-Club use? Is this use compliant with the relevant licenses? Was there a policy to prevent potential issues in the future? Questions like these address an increasingly hot topic in M&A. With the growing use of OSS, the risk increases that a target company’s software could have become “tainted” by the inclusion of OSS. The target company’s proprietary software itself would then become OSS which could, certainly in the case of a "software-heavy" company such as J-Club, drastically reduce its value. Fortunately, no significant issues were found in this case. "If you want to exclude this type of risks, you really have to dig deep into the code", says Marco van Os. "We did and it strengthened our initial finding: Its in J-Club's DNA that software quality is a primary source of company value, and they treat it accordingly."