Dg Business Case

342 Words2 Pages
1) Prior to KKR was DG well managed? The company was not bad managed, but not all the value was extracted. The company was just pursuing sales growth without focusing on operational efficiency. a. The company was growing with an higher rate of the industry even if was the market leader (9% vs 5%) b. the operating margin was in line with the industry, that highlights that the company was not leveraging the bigger scale to increase profitability (2-4%). c. The company substituted the CEO, but only 8 Seniors Executives over 30 and no middle manager maintaining the structure of the firm d. Indeed analyzing the 10-k and the DG report we can see that most of the improvement came from operational efficiency 2) What was KKR investment thesis? DG dollar have a leading position in the convenience store market and did not extract all the value from operational efficiency. We can extract more value focusing on maximizing store performance and investing in new technologies to reduce OPEX. Additionally interest rates for store relocation was forecasted to go down since we were on the verge of a crisis 3) Key area of operational efficiency? (Operational efficiency is considered as internal lever a. Merchandising. i. Focus on top performers SKUs ii. Improve sale cycle to reduce seasonality b. Store operations i. Key performance metrics identified (model store) ii. Reduce inventory c. Cost Management i. Tools to improve cost control ii. Overall inventory turnover 4) LBO to enhance equity returns? LBO reduces in the short term equity returns and, in order to maintain profitability put pressure on the management to achieve operational efficiency. Second it provided tax shield to be used once the principal got reduced. Getting secured and unsecured debt 5) Key risk factors? a. External Recession upcoming b. Internal Create value with project Alpha c. Internal

More about Dg Business Case

Open Document