Matahari Department Store is the largest department store in Indonesia, and introduced the modern department store concept to the country in 1972. It is one of the country's leading brands, well-respected for supporting the Indonesian economy through its employee base and supply chain, and with a commitment to responsible sourcing.
CVC's local presence provides an edge
CVC global network of local offices staffed with local professionals provides CVC with a unique origination capability. In 2010, Indonesian national and CVC Managing Partner, Sigit Prasetya, had identified MDS as an attractive investment opportunity given his local knowledge of the Indonesian market and his on-the-ground relationships. CVC's local presence enabled CVC to identify the quality of the MDS business and the opportunity for further growth driven by the rise of Indonesia's middle class, increasing household income and urbanisation.
CVC's deep local roots, established corporate relationships and commitment to the region, helped cement the firm as the optimal partner for MDS. In addition, CVC was able to leverage its global retail expertise and support management accelerate the business expansion.
In April 2010, CVC Asia III completed the acquisition of a 98% stake in the business in partnership with MDS's controlling shareholder, MPPA, at an enterprise value of US$892 million. This was the largest leveraged buy-out by a foreign private equity-led consortium ever undertaken in Indonesia and demanded bespoke transaction structuring, governance and financing.
Refashioning the business to grow footprint and sales
The value creation plan began with the appointment of a new chief financial officer to round out the deep expertise of the management team. A senior retail executive closely involved in the transaction joined MDS's board. Key hires were also made in merchandising, real estate and human resources, and a senior management equity programme was implemented.
CVC and the management team developed a clear retail development strategy, tailoring store concepts to the needs and demographics of each location. Stronger relationships with mall developers and landlords significantly accelerated the overall store expansion plan. Modern business systems and practices were embedded to drive up profitability.
- IT hardware and software was upgraded and enhanced across MDS
- Data-driven analytics were instituted to ensure good decision making and KPIs set for close monitoring
- Same-store-sales-growth was optimised through better merchandising, direct marketing and employees' sales incentives
- Cost reduction measures were implemented, including supplier consolidation and more efficient labour scheduling
- Rigorous capex budgeting and approvals, together with re-negotiated supplier terms and centralised procurement, delivered much-improved cash management
CVC's complementary partnership with the MDS management team meant that the value creation plan was executed quickly and efficiently. By 2013, the business had significantly increased its revenues and EBITDA and boosted its market share.
The strong growth achieved under CVC's ownership supported an IPO of MDS in 2013 and since making the investment in MDS, CVC continues to be incredibly active in Indonesia and is viewed as a highly attractive partner for families and corporates wishing to accelerate the growth of their businesses.