BAIN CAPITAL & DOLLARAMA Assignment 01 – SGMT- 6050 Arunabha Ghosh Dastidar | 215705239 [email protected] Declaration I Arunabha Ghosh Dastidar hereby certify that the attached assignment & all materials therein have been created by me unless otherwise footnoted & that all the material contained herein including charts, graphs & other materials have been created by me.
Case Outline Larry Rossy’s Dollarama is considered as one of the most coveted & successful stores in Canadian value retail Industry. With over 349 stores across Canada (75% of which are in Quebec & Ontario), Dollarama’s size & spread, despite its geographical concentration, has been able to outrun its competitors & create a substantial real-estate in the consumers’ mindset. Economies of scale, Rapid expansion with mostly owned stores & the maintained double-digit EBITDA from last few years, makes it an appealing candidate for leverage Buyout (LBO) have attracted lots of Private equity funds in Dollarama like Blackstone, Onex & the Ontario Teachers’ Pension Plan, to name a few. Boston based Bain Capital is one of the major bidder, speculating to accomplish the buyout deal for Dollarama from Larry Rossy, who is in his late 60s but intend to work with the company post-transaction too. With an experience in major successful leverage buyouts like Sleep Country Canada in past, Bain’s investment approach was centered on driving bottom line growth through making operational recommendations & changes to its portfolio companies after careful analysis of market growth potential, industry attractiveness, competitive position & financial performance. The deal attracts a leverage of about $600 million from major Canadian banks & has a number of improvements & risks to be considered in order to justify & materialize returns on this gigantic value of transaction. Situational Analysis – Key Prospects & Stakeholders’ perspectives Analyzing the situation from Larry Rossy’s perspective, I would be anxious about the following key prospects for Dollarama, in which I invested more than a decade in strategizing, expanding & creating a known a known brand in Canadian household: 1. Expansion & Market Growth Post Transaction – Even though I am going ahead selling out the majority stake in Dollarama, but I would still like to see it expand & grow in market share. This instigates me to analyze the capability of the bidders to keep the business expanding & afloat even after the nuances of the LBO have taken place. As presented in the appendix section 2.2 , Bain capital has a strong hold in business consulting & operations. Its business consulting techniques for portfolio businesses have predominantly yielded superior returns than other PE funds interested in this bid. 2. Valuation, Bid & Clarity of Financial Package – Canadian Value retail industry is far less saturated & has a good scope of expansion & growth for company like Dollarama in the sector which boasts decent margins. So, to safe guard the best interests of the stakeholders, getting the right valuation & bid for the company is essential for my consideration. This not only substantiates the legacy of Dollarama
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- Fall '15
- Leveraged buyout, Variety store, Bain, Bain Capital