KKR – The Dollar General Buyout Harvard Case Solution & Analysis

The recent decline in the business of Dollar General was due to some undervalued decision taken by the management of the company and the company ended with a decline in the profitability of the company and on the other side of the picture, the management of Dollar General decided to go for the expansion plan and didn’t even think about the demand and the growth perspectives of the stores of the company.

In context of the per shares price of Dollar General, we believe that the price of the shares quoted by Dean Nelson at the time of acquisition of Dollar General was a bit low for the company as their original market price prevailed more than that. We believe that although the company was not performing accordingly but the sudden decline cannot be estimated. The company has their own strengths and with some certain changes in the policies of the company, the management could bring back the whole company to its previous position.

Both the companies need to address the multiple issues before the acquisition transaction. The management of KKR has decided to pay $22 per share and that is 30% over the price of per share of Dollar General as a premium to the existing shareholder of the company and also the premium was higher than the similar deals in the industry in order to make this deal more attractive to the shareholders of Dollar General. The estimations and expectations need to be properly addressed and checked, if in case found misleading or wrong, then the should be addressed accordingly. The agreement of the shareholders of Dollar General was the key factor. Their agreement over the price offered by the management of KKR was the basis of the expected synergies and economies of the scale. Another main reason to be addressed properly was to make sure if the management of the company has properly addressed the slow and steady decline in the sales revenue and in the profitability of Dollar Company.

After the successful acquisition of Dollar General by KKR, Dollar General went to acquire one of its competitors; Family Dollar at $80 per share for the shareholders of the Family Dollars. The synergies and economies of scale acquired with the acquisition of Dollar General by KKR were better than expected and this was one of the best deals made by KKR management. As expected, the management of KKR, who was very concerned and hopeful about the deal, has created high values to both the companies and the problems the Dollar General were previously facing have been solved accordingly. Dollar General has started to increase its value by offering exciting offers to the targeted markets and with the help of the credibility of the management of KKR it has made this decision fruitful. Till March 2014, KKR had finalized and done approximately around 23 transactions in different regions of the World which required the commitment of around $80 billion dollars............................

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