What You Should Know:
– The recent announcement of private equity firm Sycamore Partners’ acquisition of national pharmacy giant Walgreens has sparked significant concern, particularly from the nonprofit watchdog Private Equity Stakeholder Project (PESP).
– PESP has released a statement expressing deep wariness about the potential impact of this takeover on patient care, worker safety, and the company’s financial stability.
PESP’s Concerns About Private Equity in Healthcare
PESP highlights the substantial risks associated with private equity investment in the healthcare sector, which has seen over $1 trillion in investments in the past decade. The organization argues that the typical private equity business model, focused on rapid returns and cost-cutting measures, can jeopardize patient care and increase the risk of bankruptcy.
Alarming Bankruptcy Trends
PESP’s findings reveal a disturbing trend: private equity firms were behind 56% of large U.S. corporate bankruptcies in 2024. In the healthcare sector specifically, private equity-backed companies accounted for 21% of bankruptcies in 2024, a figure that remained unchanged from 2023. More concerningly, 88% of the largest healthcare bankruptcies in 2024 involved companies with a history of private equity ownership.
Sycamore Partners’ Troubled Track Record
PESP raises specific concerns about Sycamore Partners’ track record, citing instances of bankruptcies at portfolio companies like Belk and Nine West. The firm has also faced fines for health and safety, wage and hour, and environmental violations.
On the 2023 PESP Private Equity Labor Scorecard, Sycamore Partners received a failing grade, reflecting concerns over workplace safety and labor practices. The firms portfolio companies have a history of serious OSHA violations, and lack any union presence. For example, Staples, a Sycamore owned company, has accrued 32 OSHA violations since acquisition.
Potential Impact on Walgreens and its Stakeholders
The acquisition of Walgreens by Sycamore Partners raises concerns about the potential for:
- Compromised patient care: Cost-cutting measures could lead to reduced staffing, limited access to medications, and diminished quality of care.
- Increased bankruptcy risk: Sycamore Partners’ history of bankruptcies at portfolio companies raises concerns about Walgreens’ financial stability.
- Worker safety concerns: Sycamore Partners’ track record of OSHA violations raises concerns about workplace safety for Walgreens employees.
- Job losses: Private equity-driven restructuring could lead to layoffs and store closures.
The nonprofit watchdog Private Equity Stakeholder Project (PESP) released the following statement on the private equity takeover of Walgreens:
“Sycamore Partners, in particular, has demonstrated problems at the portfolio companies it has owned. Under Sycamore Partners’ ownership, multiple companies, including Belk and Nine West, have filed for bankruptcy. In addition, Sycamore Partners-owned companies have been fined for a number of health and safety, wage and hour, and environmental violations.”
