Lessons in Corporate Finance

CHAPTER 21 Mergers and Acquisitions: Execution (The Dollar Stores)

This chapter explains how finance functions in the real world. The battle between Dollar General and Dollar Tree for Family Dollar is used as our illustration. “Getting to yes,” the execution part of an investment or merger, can follow either a simple or tortuous path. The story of Family Dollar includes many obstacles to getting a merger deal done. A few of the pertinent obstacles are included in the following list:

• First, there were three bidders (Trian Partners, Dollar Tree, and Dollar General), which generated multiple bids.
• Second, there were a number of activist shareholders and proxy advisory firms trying to influence the outcome. These included Carl Ichan, Paulson and Company, Elliot Management, Glass Lewis, and Institutional Shareholder Services.
• Third, Family Dollar had second-generation family management that sought to maintain control of the firm.
• Fourth, the U.S. government—and in particular the Federal Trade Commission—had to approve any merger after evaluating if it was anticompetitive.
• Fifth, the shareholders had to vote on any merger, and factions of the shareholders filed three lawsuits in this merger.

Let’s look at how it all came together by adding more detail to the above list.

The Time Line

There were three bidders for Family Dollar.¹ Trian Partners was the first. As noted in Chapter 18, in late July 2010, Trian Partners disclosed that it owned 8.8% of Family Dollar’s outstanding shares. ...