It is important for Bain to grasp the long run atmosphere during which Dollarama would pass so on value his judgment relating to the acquisition. the present rate of growth is important during this situation as Bain would need that the corporate prosper with this rate within the future in addition. By comparison Dollarama with some American firms like 99 cents solely stores, dollar General Corporation and Family dollar Store (Exhibit 1). The expansion rate of Dollarama is relatively the same as those of some American Dollar store firms. Comparables EBITDA EV/EBITDA Currency FY 2004A FY 2005E FY 2004A FY 2005E US Value Retailers 99 Cents Only Stores USD $ 110.30 $ 75.60 10.4 15.2 Family Dollar Stores USD $ 478.00 $ 512.10 11.2 10.4 Dollar General Corp USD $ 662.50 $ 721.50 11.1 10.2 Dollar Tree USD $ 400.70 $ 422.80 9 8.5 AVERAGE $ 412.88 $ 433.00 10.425 11.075 US Discount Retailers Wal-Mart Stores USD $ 12,713.00 $ 14,672.00 20.7 17.9 Canadian Retailers Shoppers Drug Mart Corp. CAD $ 568.50 $ 636.30 14.7 13.1 Sears Canada Inc. CAD $ 451.40 $ 413.60 8.6 9.4 Forzani Group CAD $ 82.30 $ 76.50 5.8 6.2 Loblaw Companies Limited CAD $ 1,860.00 $ 2,125.00 12.3 10.8 Canadian Tire CAD $ 613.00 $ 695.00 11 9.7 AVERAGE $ 715.04 $ 789.28 10.48 9.84 Using various average multiple, I can conclude the worth estimate for the leveraged buyout (LBO) of Dollarama. choosing an entry multiple of 11.10, Bain can reach a procurement value of Dollarama of around $1218181. However, this doesn't embody the fees that may be needed at the time of happening of LBO. This multiple is that the recent multiple of 2005 August. Therefore, by assuming this valuation, I can create predictions through the projected debt levels. The increment in debt level wouldn't have an effect on the Dollarama’s potential to pay back its interest from its earnings before tax within the forthcoming years following the acquisition. Dollarama would be able to have its coverage quantitative relation of around 3 times in 2005 then declining slightly leaving no major impact on its ability of pay its interest. It would be favorable to review the debt position of Dollarama before Bain goes for the buyout within the year 2005. Earnings before interest and tax and allowance as per CAPEX interest coverage ratio this can be EBITDA/Interest is 8.5 times. this can be quite snug zone because the debt thinks about and therefore the indisputable fact that the
disbursement obligations may be simply met by Dollarama. this debt ratio of 2005 is around 13.4% Post-Merger insights - McKinsey 7s
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- Fall '15
- Leveraged buyout, Variety store, Bain, Bain Capital