Chapter 22
Edcon: Going shopping in South Africaa
It was 2 A.M. on Monday, January 8, 2007. After 6 days in Johannesburg, Dwight Poler and his team at Bain Capital were exhausted but buoyant. As they put the final touches to their due diligence for Edgars Consolidated Stores, the prominent South African retailer known locally as Edcon, they looked forward to the forthcoming auction with excitement and trepidation. With so much at stake, they had to decide not only what the company was worth, but also their next plan of action based on how their competitors might react. Dwight hoped that Bain Capital’s strategy of having an internal team of 12 conduct their own due diligence would enable them to better value the deal, and in doing so eclipse offers by KKR and Blackstone (who were relying heavily on outside consultants). As in all private equity auctions, it was imperative that they avoid the so-called “winner’s curse”. In the words of team member Ted Berk, they had to “feel great about paying the highest price”.
While the team had clear views about Edcon, more work was required to understand the market in which it operates. Unlike in the U.S., where transactions can be largely viewed on their own individual merits, there were other factors at play in an emerging market transaction of this magnitude. This deal would be one of the biggest ever foreign investments in South Africa, and so the team had to obtain a deep understanding of the prospects not only of the retail sector in ...
