The scenario presented here is that Bain Capital Private Equity (Bain Capital) is considering a buyout of Dollarama, a retail chain specializing in dollar priced goods. A senior associate at a large Canadian bank named Sharon Louis, alongside her team, is expected to be part of the banking syndicate offering $600 million in deal financing to Bain and thus must analyze the transaction to determine if it is a sound investment. If Bain makes a large enough offer, they would be able to outbid other seasoned investors such as Blackstone, Onex, and the Ontario Teachers Pension Plan (OTPP).
Larry Rossy, Founder and CEO of Dollarama, has established three notable strategies that surround his business concept; adopting a fixed price point dollar concept, a store expansion strategy in Canada, and sourcing merchandise directly from overseas suppliers(38). It is evident that Dollarama is seeking to sell very low cost products that are of high quality, scale the business opening additional stores in Canada, and decrease costs by outsourcing production to ultimately maximize their bottom line, in order to be able to sustain the business whilst keeping true to their $1 prices. Looking at their progress up to date, it seems as though their strategies are working out (AP1).
Is Dollarama a good Buyout target? (Internal & External perspective)
Before considering whether Dollarama is a good buyout target, it is important to consider the internal perspectives. After completing a VRIO Analysis, it is evident that both Dollarama’s brand and management provide some competitive advantage (AP1). Dollarama’s strong brand exists because ever since their inception, they have been family owned and ran up till the point of significant expansion of additional stores. In addition, Larry Rossy has placed a great deal of importance on ensuring the consistency of the layout of Dollarama stores and that the customer feels the same way in any one location.