Saunders Karp: Striking the Proper Balance

Abstract

This case involves the decision making process of Saunders Karp, a private equity firm, which was considering investing in Dollar Tree, a single-price-point discount store chain. The case requires students to perform a cursory valuation analysis, negotiate with counterparts from the Dollar Tree team, and make an investment recommendation. Excerpt UVA-ENT-0050 Rev. Mar. 18, 2013 Saunders Karp: Striking the proper balance Three Weeks or Out Sitting in the waiting area at the Detroit Metropolitan Wayne County Airport, Macon Brock turned to John Megrue and threw down the gauntlet: “Either we finish these discussions in the next three weeks, or the deal is off.” Brock, CEO of Dollar Tree Stores (“Dollar Tree”), and Megrue, an associate in the private equity firm of Saunders Karp (“SK”), were in the final stages of a courting process, and each was trying to determine whether to complete a transaction that would make them equity partners in Dollar Tree. As part of the investment process, SK requested a due diligence tour of a sample of Dollar Tree's stores in Detroit. Megrue was intrigued by what he saw during the trip: Dollar Tree customers seemed to line up in order to buy a variety of one-dollar merchandise. . . .