Dollar General Bids For Family Dollar Case Study
Dollar General is a chain of variety stores that offer a wide range of products, including groceries, household items, and clothing. In August 2014, Dollar General made a bid to acquire Family Dollar, another discount variety store chain. This move was seen as a strategic move to expand Dollar General's market share and increase their presence in the discount retail space.
The Bid
Dollar General offered $9.7 billion to acquire Family Dollar. This was a higher bid than the $8.5 billion bid made by Dollar Tree, another discount variety store chain. Dollar General's bid was all-cash, which was more attractive to Family Dollar's shareholders.
Family Dollar's board of directors initially rejected Dollar General's bid, citing antitrust concerns. The Federal Trade Commission (FTC) had previously blocked a merger between the two companies in 2007. However, Dollar General argued that the retail landscape had changed since then, and that the acquisition would not harm competition.
The Case Study
The Dollar General bid for Family Dollar is a case study in mergers and acquisitions. The case highlights the importance of due diligence, negotiations, and regulatory approval in the M&A process.
Due diligence is the process of investigating a company's financial and operational health before making an acquisition. In the case of Dollar General's bid for Family Dollar, due diligence would have included analyzing Family Dollar's financial statements, supply chain, and customer base. This would have given Dollar General a better understanding of the risks and opportunities associated with the acquisition.
Negotiations are a key part of any M&A deal. In the case of Dollar General's bid for Family Dollar, negotiations would have included determining the price, terms, and conditions of the acquisition. Dollar General's all-cash offer was more attractive to Family Dollar's shareholders than Dollar Tree's cash and stock offer.
Regulatory approval is necessary for any M&A deal that could potentially harm competition. In the case of Dollar General's bid for Family Dollar, the FTC was concerned that the acquisition would harm competition in certain markets. Dollar General argued that the retail landscape had changed since the previous merger attempt in 2007, and that the acquisition would not harm competition. Ultimately, Dollar Tree's bid for Family Dollar was approved by the FTC.
The Impact
The Dollar General bid for Family Dollar had a significant impact on the discount retail space. The bid sparked a bidding war between Dollar General and Dollar Tree, which ultimately led to Dollar Tree's acquisition of Family Dollar. The acquisition made Dollar Tree the largest discount variety store chain in the United States, with over 13,000 stores.
The acquisition also had an impact on the stock prices of both Dollar General and Dollar Tree. Dollar General's stock price dropped after the announcement of the bid, while Dollar Tree's stock price increased. However, Dollar General's stock price eventually recovered, and the company continued to perform well in the discount retail space.
Conclusion
The Dollar General bid for Family Dollar was a strategic move to expand Dollar General's market share and increase their presence in the discount retail space. While the bid was ultimately unsuccessful, it highlighted the importance of due diligence, negotiations, and regulatory approval in the M&A process. The acquisition of Family Dollar by Dollar Tree had a significant impact on the discount retail space, making Dollar Tree the largest discount variety store chain in the United States.