Dick Smith Holdings: Critical Analysis of Business Decisions

This report provides a comprehensive analysis of Dick Smith Holdings, a major electronics retailer in Australia and New Zealand. It traces the company's history from its founding by Dick Smith to its acquisition by Woolworths, and later, Anchorage Capital Partners. The report critically evaluates the strategic decisions made during Anchorage's ownership, including the Initial Public Offering (IPO), and the subsequent expansion plans that ultimately led to the company's downfall. It examines the dilemmas faced by both Anchorage Capital Partners and the directors of Dick Smith Holdings, highlighting issues such as poor inventory management, unsustainable growth, and the impact of changing market dynamics. The report also explores the financial aspects, including cash flow, valuation, and the impact of the IPO. The analysis concludes by identifying key factors contributing to Dick Smith's failure, emphasizing the need for sound financial planning, effective inventory control, and adaptability to market changes. It also mentions the limitations of the analysis, focusing on the lack of real-world consideration of factors such as time and cost.

INTRODUCTION
1. Brief Summary of Dick Smith Brand....................................................... 2
2. Critical Evaluation of DSH, when obtained
by Anchorage Capital Partners and IPO………………………………… 3
3. Dilemmas Face by two isolates sets of individuals:-
i. Anchorage Capital Partners
ii. Director and senior official of Dick Smith Holding … ........................... 5
4. Conclusion… ………………………………………………………………. 6
5. Reference …………………………………………………………………..

SUMMARY
HISTORY
Dick Smith is biggest Electronic chain in Australia and New Zealand. Dick Smith Brand is
framed by Dick smith and his wife in 1968 in Sydney and owned by him. It is most notorious
brand in Australia. At first, Smith concentrated on independent company of introducing and
overhauling auto radio. In 1969 Smith's prosperity expected it to move to greater business.
Alongside the auto radio business Dick opened "Dick smith Holdings".
Following 14 years in 1982 they sold it to Woolworth's Limited. At first Dick and his better half
sold 60% of Dick Smith brand to Woolworth Limited, following 2 year Woolworth took finish
responsibility for organization. The late 1990s the organization set up "Dick Smith Electronics
powerhouse". The "Powerhouses" conveyed an extensive variety of items.
Following 30 years of proprietorship Woolworth's constrained declared that, they quit for the day
100 Dick Smith Stores and the organization have sold to Australian Investment Firm "Anchorage
Capital Partners" in September 2012. ( Anchorage capital partners is a specialized private equity
firm that control the business investment and make strong market position and brand) for an
initial capital of $20 million and total sum of $115 million. After acquisition with Dick Smith,
Anchorage Capital Partners establish new management and appoint new CEO to the company.
After move delicately by Anchorage for two years, Anchorage listed Dick Smith Holding on
Australian Securities Exchange (ASX) in 2013 and Dick Smith became plainly public
organization.
In October 2013 Dick Smith assumed control over the Home Entertainment Department in 30
David John, and form Dick Smith Electronics (DCE).
In September 2014 DSE reported to buy of MAC1, an approved Apple Service Center.
In December 2014 DSE set up Trade Me Store. Members will able to buy directly through Dick
Smith.

On January, 2016 Dick Smith holding fallen by 80% since they had listed in Australian Stock
Exchange in December 2013.
In 2016 organization will shut following a few year of it’s obtaining by Anchorage Capital
Partners.
On March 15, 2016 revealed that Dick Smith acquired by Kogan.com an online retail founded
by Ruslan kogan.
Jan 2016
Administrator and receivers appointed
DSH become public for 2 years
Anchorage controlled for 1 year
Woolworth control for 30 years
Dick Smith control for 14 years
Nov 2013
Shares in Dick Smith business offer by IPO
Nov 2012
Dick Smith business acquired by Anchorage
1981-1983
Dick Smith business acquired by Woolworth
1986
Dick smith business commenced by Richard Dick Smith
Figure 1:- demonstrate possession and control

Valuation of Dick Smith Holding When DSH Acquired By Anchorage
On 26 November 2012 Dick Smith holding had 100% ownership for Smith Electronics from
Woolworth. At the season of obtaining with Anchorage DS sub-possessions was 98% claimed by
the Anchorage.
Anchorage bought a DS business for $94 million:-
1. $20 million money installment on obtaining
2. $50 million trade installment out June 2013,
3. $24 million paid in portions over the FY 2014.
Anchorage paid $20 million as "working capital alteration" to Woolworth, the total sum paid to
Woolworth $115 million.
Anchorage framed new official administration leader by the Nick Abboud (CEO). Anchorage
additionally built up another technique get ready for Dick Smith business including development
in the store arrange, empowering clients in store, on the web, phone and enhancing the
portabilities of item.
At the time of Anchorage ownership, Dick Smith business expanding its stores networks
combined with three different Brand such as –
• Dick Smith Stores
• David jones Electronic powered by Dick Smith
• Move: concept store focus on mobility of product and accessories.
Anchorage controlled the business for the time of one year.
On 25 October 2013 Dick Smith Holdings turned into an open Company with a goal of raise
support from open advertising. The reason for this Initial open offering was Dick Smith needs
Anchorage acknowledges some part of it venture. At the time first sale of stock cost was $2.20
per share.
Revenue for the year ending 2014 was approx. $1.2 billion
Cash movement from financial year 2013 to financial year 2015:-

This chart represents the difference between the cash flow and working capital profiles of
financial year of 2014-2015.
Key focuses:-
Financial year 14
Earnings of $43.9 million, a positive commitment.
Increment in real money adjust, lessening in working capital
Capital Expenditure of $30 million.
Deferred payment to Woolworth of $24 million
Cost connect with initial public offering of stock $15 million
Financial year 15
Report profit $ 71.9 million
Increment working capital $ 67.1 million
Increment in borrowings $70.5 million
The Initial public offering was fruitful and oversubscribed. On December 4, 2013 Dick Smith
Holdings obtained the sub-holdings and turned into a definitive holder of Dick Smith Business.
Initial Public Offer:-
This was the first run through Dick Smith Holding offers his offer for public. The principle
reason was to acquire cash from public and re-buy his sub – possessions shares from Anchorage
Capital Partners.
Australian Electronic retailer Dick Smith Holding raised $315 from its first sale of stock and
Anchorage Capital Partners sold most shares of Dick Smith sub-holding offers to the investors.
Anchorage Capital Partners stopped to control over Dick Smith Holding from the day of Initial
public offering.

After gaining success Dick Smith has taken undertaking full control over Dick Smith business.
Overview of initial public offering:-
Offer statistics
Offer price $2.20
Total number of shares issue 156.6 million
Shares held by Anchorage 47.3 million
Shares issue at completion 236.5 million
Market capitalization $ 520.3 million
Enterprise value $533.8 million
Indicative annual dividend 4.6%-5.6%
Anchorage initially retained 20% shareholdings in listed company Dick Smith Holding.
Anchorage sold his holding in September.
Dilemmas Faces By:-
1. Chief and senior official of Dick Smith Holdings
First time Dick Smith issue its share in Australian stock exchange in 2013, the main motived of
this IPO was to recover all its holdings from Anchorage Capital Partners.
During the period of Anchorage Capital partner Dick Smith expanding his business. As a result
of the program and growth initiatives, EBITED increase from $23.4M in Financial Year 13 to
$71.8M in financial year 14.
After this Dick Smith took over the complete hold on business in December 2013. Dick Smith
Holdings wants to expand his business after getting success in Initial Public Offering, and
invested in business in un-planned way due to this investment they face a huge loss. Investor of
the Dick Smith starts withdrawing his investment.

The collectors of dick smith property make legitimate move against eight chiefs and
administrators, including ex-President Nick Abboud for rupture of their obligation to take
sensible care. For the benefit of dick smith Ferrier Hodgson recoup sum equal to Dick Smith's
last profit, absolutely about $28.4 million misfortunes about $60 million due to poor
administration stock, and case held up in preeminent court of New Zealand.
National Australian bank and HSBC bank likewise purchased separate legal against Mr. Abboud.
The main reason of this dilemma is:-
Fruitful posting in Stock trade Dick smith getting a charge out of solid deals development, and
got ready for an extension and new line of business. Dick Smith development designs gobbled up
all the surplus income and required acquiring in the meantime.
The extension designs was "un-checked" and the stock by choice in 2015 conveyed excessively
stock that had exaggerated. December 2015 stock blowout deal was required for accomplishing
solid edge. December 2015 exhibit great disasters in a half year $116.7 million.
Mr. Hayes said a heartbreaking end of one of the famous retailer of Australia. Dick Smith
holding has been fallen by over 80%. Despite that the bank of organization detached for a long
time, on 25 February 2016 Dick Smith stores to shut after neglect to discover the purchaser just
about 3000 occupations were lost. It was an extraordinary parching time of Australia.
Total financial shortage of Dick Smith Group
Add up to shortage to the lenders of Dick Smith Group will be abundance of $260 million.
Distinction between the setback of $260 million and book estimation of advantages was $170
million.
The last store of Dick Smith was closed on 3 may 2016.
On 25 July 2016 Dick Smith leasers have put electronic retail into liquidation. Creditors were
relied upon to lose $ 260 million.
2. Dilemma face By Anchorage Capital Partners:-

Anchorage Capital Partners' Phillip Cave and Bill Wavish, who speak to the private value firm
on Smith board, would be Grill on their parts. Phillip Cave denied charges that Anchorage
Capital Partners pull off Dick Smith Holdings.
However, Woolworth sold the organization to Anchorage Capital Partners, for an underlying
capital of $20 million and total cost of some $ 115 million. It has contended that Anchorage paid
just $10 million in the event that rest out of the business itself. In 2013 Dick Smith glided by port
on the ASX, turned into a Public organization. This was the best heist ever.
Executive of Dick Smith accuse the Anchorage Capital Partners for floatation of DSH. They said
Anchorage Capital Partners speak to the wrong estimation of business, in view of that this
organization is going to close.
Anchorage Capital the private esteem association that purchased Dick Smith holding
productively and floated it on Australian Stock Exchange. Anchorage Capital Partners sold
greater part of Dick Smith offers to investors. These offers were unsecured, because of which no
recuperation accessible for the unsecured creditors.
Anchorage faces not much problems in this case.
Conclusion
This Assignment spoke to the fundamental data of Dick Smith possessions and examinations the
fall of enormous retail organization. Dick Smith is one of the biggest retail of Electronics since
1968. Dick Smith extended his business in Australia and New Zealand. Subsequent to picking up
13 years of achievement Smith sold his business to Woolworth.
In 2014 Dick Smith recorded his organization in Australian Stock Exchange. At first the
organization acquired from securities exchange, but since poor administration arranging and
stock control the organization faces immense misfortune.
Loan bosses of the organization left the organization and Dick Smith don't have any purchaser in
the market so the outcome is Dick Smith express his terrify at nearer of firm.
Dick Smith is not a lone organization that was wobbling by Anchorage Capital Partners. There
are some more examples are:-

Anchorage Capital Partners also buy Burger king New Zealand from 2009-2011.
Anchorage capital partners don't meet excessively inconvenience on raising asset from Sydney
based Dick Smith business. Anchorage intends to go with new in-support private value manager
and furthermore get ready new investors for new – firm.
Anchorage Capital Partners focus at the investments on - Presently, the company was not
working at their full potential; they had headquarters in – Australia, New Zealand and South East
Asia, minimum revenue of $100 million.
Anchorage turnaround program was – it directly involve in the business, and significant
knowledge of business operation, business leadership, finance and strategy.
WHY DID DICK SMITH FAIL:-
• Change in customer demand pattern.
• losing market share by decline comparable sale.
• Expansion plan required proper financial planning.
• Considerable supplier was made commitment and bank borrowing.
• Clearance sale did not generate enough sales.
• Unable to get favorable credit terms, product mix and store representation.
In the wake of concentrate the entire about Dick Smith we can understand that business required
legitimate arranging, great control over stock and administration. Without design work gives you
the negative outcome.
However, time would need to know the real cause of rapid demise.
Limitations
The primary constraint is that the examination of 'Australian Securities Exchange corporate
administration rule' is at the calculated stage and is not consider in real, such as, the time
wasting, cost about and controlling assets. In this way under these conditions product might be
extraordinary.

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