Question 1. Discuss Dollarama’s attractiveness as an LBO candidate The Dollarama can be recognized as a target in an LBO with strong management and sustainable competitive advantage. Details will be explained as following. As for a firm with strong management, two points may be used to cover this topic. Firstly, with a management team made up of family members for an average of 25 years, they can provide with a stable management strategy to maintain the firm’s profit growing in a steady pace. Secondly, as Larry Rossy directly involved in operation management of every store they open, high potential growth return can be expected. There are two points can explain that situation. The first one is that by offering a set of core products and self-designed product, Dollarama is shifting from close-out merchandise to a ‘treasure hunt’ visit for consumers with high quality products. Second one is that through sourcing alternative supply chain from Asia, Dollarama’s supply chain has been stable and efficient. To classify the Dollarama as a company with sustainable competitive advantage, we can expand from overseas and domestic aspects. By comparing with US. Retail industry, the Canada retail industry was more oligopolistic and less cyclical. Besides, the retail market was far less saturated in comparison with USA. Both two points can be regarded as strong supporting ideas for the sustainable growth prospect for Canada retail industry. Another fact is that as the fastest growing dollar store, Dollarama is in the dominant place in Canada. With high construction costs for other firms like A Buck or Two, the expanding pace is much lower than Dollarama. Moreover, company like DSM have main business in western provinces of Canada which can’t be a serious competitive pressure for Dollarama in a long time.
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- Fall '19
- Leveraged buyout, Bain, Dollarama, Private equity firm