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Fast Company
4 days ago
- Business
- Fast Company
Walgreens buyout could change the future of pharmacy care
Pharmacies are more than just stores. They're vital links between people and their healthcare. One of us, Patrick, witnessed this firsthand in 2003 while working as a pharmacy technician at Walgreens in a midsize West Texas town. Each day involved handling hundreds of prescriptions as they moved through the system—meticulously counting pills, deciphering doctors' handwriting, and sorting out confusing insurance issues. The experience revealed that how pharmacies are owned and managed is as much a public health issue as it is a financial one. Fast-forward to today, and Walgreens—one of the world's largest pharmacy chains, which filled nearly 800 million U.S. prescriptions in 2024 —is at a turning point. In March, the company announced it would be acquired by private equity firm Sycamore Partners for $10 billion, just 10% of its peak market value. That deal takes the storied pharmacy chain off the public market for the first time in nearly 100 years. We're professors who study the intersection of medicine and business, and we think this deal offers a window into the future of pharmacy care. It matters not just to pharmacists but also to the tens of millions of Americans who rely on outlets like Walgreens to meet their everyday health needs. The rise and struggles of Walgreens A lot has changed in the pharmacy industry since 1901, when Charles R. Walgreen Sr. purchased the Chicago drugstore where he served as a pharmacist. The company went public in 1927, expanded rapidly throughout the 20th century and grew to 8,000 stores by 2013. By 2014, a merger with the European pharmacy chain Alliance Boots made Walgreens one of the largest pharmacy chains in the world. More recently, however, the picture for the pharmacy industry hasn't been so rosy. Labor costs have risen. Front-end retail sales (things like snacks, greeting cards, and cosmetics) have fallen. And financial pressures from pharmacy benefit managers —those third-party groups that manage the cost of prescription drug benefits on the behalf of insurers—have grown. All of these things have significantly constrained revenues across the industry, leading stores to shutter. Some estimates suggest that as many as one-third of U.S. retail pharmacies have closed since 2010. Against that backdrop, Sycamore Partners' March acquisition of Walgreens raises big questions. What does Sycamore see in this investment, and what might their strategies imply about the future of American pharmacy care? Framing the private equity bet Private equity firms typically buy companies, streamline their operations, and seek to sell them for a profit within five to seven years of the acquisition. This growing movement of private equity into the global economy is by no means limited to healthcare. In 2020, private equity firms employed 11.7 million U.S. workers, or about 7% of the country's total workforce. The total assets under management by such investors have grown by over 11% annually over the past two decades, a trend that's expected to continue. In looking at Walgreens, Sycamore, like many of these businesses, likely sees an opportunity to buy low, cut costs and improve profitability. One survey of private equity investors found that the most common self-reported sources of value creation in these deals for companies of Sycamore's size were changing the product and marketing it more robustly to drive demand, changing incentives for those within the business, and facilitating a high-value exit. While private owners may have more patience than public markets, critics argue that private equity firms tend to have a short-term focus, looking for quick, predictable services of margin improvement—like, for example, cutting jobs. There's some evidence in favor of that claim. One study found that employment often drops in the years following a private equity buyout. And if the focus shifts to repaying debt or prepping for resale, long-term projects, such as investing in future innovation, can get deprioritized. The history of privatized public companies offers a mix of successes and failures. Dell Technologies and hotel chain Hilton are two prominent examples of companies that went private, restructured successfully, and came back stronger. In those cases, going private helped management focus without the constant pressure of quarterly earnings reports. On the other hand, companies such as Toys R Us, which was taken private in 2005 and filed for bankruptcy in 2018, show how high debt and missed innovation can lead to collapse. What's next for Walgreens If part of the returns will be driven by 'buying low' (the easiest indicator of potential future success to measure as of today) Sycamore started well: Its purchase price represents a mere 8% premium over the market trading value on the day of the announcement, significantly less than the 46% seen across industries in 2023. That said, Sycamore financed 83.4% of the purchase with debt, a number on the high end for these kinds of transactions. Healthcare groups have pointed to this number while raising concerns that innovation-focused investments may take a back seat to debt obligations. As the dust settles on the purchase, Sycamore has indicated an interest in splitting Walgreens into three business units: one focused on U.S. pharmacies, one on U.K. pharmacies, and one on U.S. primary healthcare through its VillageMD subsidiary. That's not unusual: Sycamore has used a similar approach before with its investment in the office supply retailer Staples, a strategy that has garnered strong financial returns but been called into question for its long-term sustainability. Given the significant financial challenges VillageMD has faced since its acquisition by Walgreens, this represents an opportunity to separately evaluate and optimize its performance. Meanwhile, Sycamore's historic focus on retail and customer-focused businesses might help it modernize the in-store experience or optimize staffing. For more than a century, Walgreens has survived and adapted to sweeping changes in retail. Now, it's entering a new chapter—one that could reshape not just its own future but the role of pharmacies in American life. Will Sycamore help Walgreens thrive, using its resources to strengthen services and deliver more value to customers? Or will pressure to generate quick returns create problems? Either way, the answer matters—not just for investors but for anyone who's ever relied on their neighborhood pharmacy to stay healthy.
Entrepreneur
12-05-2025
- Business
- Entrepreneur
More Robots Will Fill Pharmacy Prescriptions at Walgreens
A robot, not a human pharmacist, may be filling your prescription at Walgreens. And there's about to be a lot more of them. Walgreens told CNBC on Sunday that it wants to have more of its pharmacies send prescriptions to one of its 11 micro-fulfillment centers, or hubs that use robotic technology to fill patient prescriptions. The goal is to have the facilities handle prescriptions for 5,000 pharmacies before the year ends, up from 4,800 stores in February and 4,300 stores in October 2023. As of February, the centers took care of 40% of prescriptions for supported pharmacies, amounting to 16 million orders filled each month. Related: Walgreens Boots Alliance Gets Bill for $2.7 Billion From the IRS After Tax Audit The move to expand automation arrives as Walgreens readies itself to go private in a $10 billion deal. The drugstore chain announced in March that it had agreed to be acquired by private equity firm Sycamore Partners, with the deal expected to close in the fourth quarter of the year. How does a micro-fulfillment center work? When a Walgreens pharmacy supported by a center receives a prescription order, the system decides if it should be filled by pharmacists at that location or sent to the center. The decision often comes down to timeliness: Centers usually handle refills that don't require immediate pickup. The facilities then use robots, conveyor belts, and scanners to fill prescriptions accurately. While pharmacists fill prescriptions by hand at stores, robots dispense prescriptions down a carefully managed assembly line at centers. There is still some human involvement at the facilities, though. A team of pharmacists and pharmacy technicians works behind the scenes at the centers to ensure that the right pills reach the correct bottles. Related: This Walgreens Product Is Flying Off Shelves, Thanks to TikTok: 'We Sold Through Nearly All of the Product' Robotic centers drive cost savings for Walgreens The micro-fulfillment facilities have had a noticeable impact on Walgreens since the first one opened in early 2021. Kayla Heffington, Walgreens' pharmacy vice president, told CNBC that the centers have helped Walgreens save $500 million to date and allowed its pharmacists to spend more time with patients. She said that the centers allowed Walgreens to improve prescription volume by 126% year-over-year, while simultaneously bringing down costs by close to 13%. Walgreens is now filling more than 170 million prescriptions per year, with the goal of raising that total to 180 million or higher with the help of the centers, she stated. Rick Gates, Walgreens' chief pharmacy officer, added that the centers give Walgreens "a lot more flexibility to bring down costs." "Right now, they're the backbone to really help us offset some of the workload in our stores," Gates told CNBC. He noted that the facilities give Walgreens an advantage over independent pharmacies and other rivals that lack robotic prescription fulfillment. Related: 'Changes Are Imminent': Walgreens to Shutter a 'Significant' Number of Stores Amazon Pharmacy has its own automated pharmacy fulfillment centers that aim to bring medications to customers in two days or less on average. Companies like Walmart, Kroger, and Albertsons each have micro-fulfillment centers that process items like groceries, but none have publicly disclosed prescription fulfillment centers. CVS has also implemented automation in its supply chain, though not publicly for its pharmacies. At CVS's Lumberton, New Jersey, distribution center, 152 robots work together to process 1.9 million products per week. Walgreens was the second biggest pharmacy in the U.S. by prescription drugs market share in 2024, right after CVS.
Business of Fashion
21-04-2025
- Business
- Business of Fashion
Boots Workers Worry About Sycamore Cost Cuts
'We've had several rounds of cost-cutting and it could happen again,' says a Boots worker. Fears are running high as the Nottinghamshire-based chemist prepares to change hands – perhaps twice in quick succession. The US private equity firm Sycamore Partners is close to finalising a $10 billion (£7.8 billion) deal to take over the listed US owner of Boots, Walgreens Boots Alliance. Experts say Sycamore is then likely to sell off assets, having previously employed this tactic with varying degrees of success at office supplies group Staples and the former owner of the footwear brand Kurt Geiger, Jones Group. It could look at picking off some aspects of Boots – such as stores, property or brands – but is more likely to sell on the entire business. Boots – which operates more than 1,800 stores and employs about 51,000 people – including about 6,000 at its headquarters in Beeston, three miles south-west of Nottingham – has already been unsuccessfully put on the block by Walgreens at least twice in recent years, with a valuation of as much as £5 billion. The company has changed hands several times in the past 20 years. After a merger with Alliance Unichem in 2006, the combined firm was taken over by private equity firm KKR in 2007, before Walgreens first took a 45 percent stake in 2012 and then completed a takeover at the end of 2014. But there are concerns now that this latest change of ownership could see the chain of stores, many of which already need more investment in equipment, staff and maintenance, take another hit. Nowhere is that more keenly felt than in Nottingham, where Boots is the city's biggest private-sector employer and has been a key to its identity since founder John Boot opened a small herbalist store on Goose Gate in 1849. The group has been based at its 112-hectare headquarters site in Beeston since 1927. 'There won't be any regret we are no longer part of Walgreens,' one Boots worker said. 'We have always been seen as a small part of that group. Before that Boots was Boots.' However, he adds: 'The fear is more stores close or there is yet another round of reducing staff in stores.' 'Private equity are in it to make money as quickly as they can and are not really bothered about the consequences,' said another. The high street is very uncertain at the moment. Who will be looking to buy into a retailer with such a huge presence? Boots Worker, Beeston On Beeston high street, several locals say they used to work for Boots or have friends and family who still do. Jessica Stanley, 38, is suspicious of private equity firms 'because they are thinking about shareholder profits and not value of the business to the community. I guess I would be concerned there's a risk the company might be gutted.' Michelle Aduhene, 50, compares any potential change to the closure of bicycle maker Raleigh's Nottingham factory two decades ago. 'They built the university [on the old factory site] and that brought students, but does it bring money? It's worrying.' She points to the hit local businesses that also benefit from Boots' employees' trade could face. However, several staff tell the Observer they would be quite relaxed about a new regime as they have already survived a lot of cost-cutting and restructuring under its various owners, including Walgreens. 'It all happens so far up the line it won't affect us,' says one. The vast Boots campus still hints at a huge empire – but much of it is now rented out to other companies, some buildings lie empty and about 17 hectares have been sold off to builder Keepmoat for redevelopment into housing. Occupants are continuing to move out. Alliance Healthcare, the owner of Boots's former wholesale arm, announced plans to close its warehouse in Beeston next year, shortly after Fareva – the French owner of Boots's former manufacturing arm, which makes products for its No7, Soltan and Liz Earle ranges – exited late last year. There are rumours that more of the site could be sold for redevelopment, with Boots apparently assessing its vacant properties, although the company does not confirm this. Some locals feared a big swathe of student housing could be built, but local property experts say it would be tough to sell off large expanses of the site because of its complex nature. It has several stunning listed buildings – including the art-deco former factory, which is now MediCity, a hub for biotechnology, health and beauty startups which has a number of spaces vacant – and modernist glass monolith D10, which until recently housed Fareva. With Boots' manufacturing and wholesale businesses already hived off, there are few divisions left that can be easily sold. However, the own-label beauty brands, including Liz Earle and No7, became a separate company about 10 years ago and could potentially be attractive to an international beauty specialist, according to industry experts. The No7 brand is now sold in the US via Walgreens and other retailers, but is also seen as key to Boots's appeal in Britain. Boots has been offering services such as obesity clinics and vaccinations, so there are new areas for potential growth Store closures then would be an obvious way to go – as evidenced by the complete exit of rival chemist chain Lloyds from the high street after it was bought by private equity. Boots has already closed more than 300 outlets in recent years but it still has a very high number of stores. Any new owner is likely to look closely at the chain's property footprint, given the rising costs of high street retail, the shift of trade to online, and competition from discounters such as Savers, Lidl and Home Bargains. Over a quarter (27 percent) of Boots staff surveyed in a poll by campaign group Organise said they feared their job would be less secure and more than a third (36 percent) said they felt conditions could get worse in the event of a takeover. As one worker puts it: 'Because the high street is a very uncertain place at the moment, who is going to be looking to buy into a retailer with such a huge high street presence?' A listing on the stock exchange is seen as unlikely, given the current volatile situation on public markets and scepticism about growth in consumer companies, so a private sale is seen as more likely. 'Boots has improved dramatically in recent years,' says one source who knows the business well, pointing to the chain's greater focus on beauty counters and use of technology to grab a share of the online market. 'But Boots is very hard to grow as it has got such big market share in most of the markets it is in, and is incessantly under attack from emerging market players. As its market share is so high there is almost only one way to go. 'Someone could run it for cash and slowly underinvest in stores but it has been through that already.' In recent years, the brand has ridden a strong beauty market, reporting a 1.6 percent rise in sales in the three months to the end of February. Underlying sales at its pharmacies and its retail business, excluding the impact of currency and store closures, both rose about 5 percent, while sales soared 20 percent. But staff say that government contracts for pharmacy services make it difficult to cover costs, and Boots has already reduced pharmacy trading hours in many stores, so counters can be closed even when the rest of the store is open. Workers also point to poor maintenance in some stores and fewer staff, meaning tills are unattended or increasingly automated, which they say is not good for older shoppers. Previously interested parties include India's Reliance Industries and restructuring expert Apollo Global Management. CVC, Bain Capital and Asda owner TDR Capital also looked at the group but balked at the then mooted price of at least £5 billion. Stefano Pessina, the entrepreneur behind all the deals at Boots since it merged with his Alliance Unichem business in 2006, is likely to be kingmaker. Those who know him suggest he could keep a stake in Boots and may want to be involved in its future – if he sees a way to make money from it. Not everyone is so sceptical. Another source who knows Boots well argues: 'There is as much a case for investment as there is for stopping it. It could go more digital.' With an ageing UK population and the Labour government's increased focus on primary healthcare, where Boots has been increasingly offering services such as obesity clinics and vaccinations, there are new areas for potential growth. 'Boots is thriving, not just surviving, and if it was able to use more of its cash, who knows? There is a change in emphasis in the UK and, on a 10-year view, there is a big opportunity,' says the source.
The Guardian
20-04-2025
- Business
- The Guardian
‘It might be gutted' – Boots braces for dose of private equity's bitter medicine
'We've had several rounds of cost-cutting and it could happen again,' says a Boots worker. Fears are running high as the Nottinghamshire-based chemist prepares to change hands – perhaps twice in quick succession. The US private equity firm Sycamore Partners is close to finalising a $10bn (£7.8bn) deal to take over the listed US owner of Boots, Walgreens Boots Alliance. Experts say Sycamore is then likely to sell off assets, having previously employed this tactic with varying degrees of success at office supplies group Staples and the former owner of the footwear brand Kurt Geiger, Jones Group. It could look at picking off some aspects of Boots – such as stores, property or brands – but is more likely to sell on the entire business. Boots – which operates more than 1,800 stores and employs about 51,000 people – including about 6,000 at its headquarters in Beeston, three miles south-west of Nottingham – has already been unsuccessfully put on the block by Walgreens at least twice in recent years, with a valuation of as much as £5bn. The company has changed hands several times in the past 20 years. After a merger with Alliance Unichem in 2006, the combined firm was taken over by private equity firm KKR in 2007, before Walgreens first took a 45% stake in 2012 and then completed a takeover at the end of 2014. But there are concerns now that this latest change of ownership could see the chain of stores, many of which already need more investment in equipment, staff and maintenance, take another hit. Nowhere is that more keenly felt than in Nottingham, where Boots is the city's biggest private-sector employer and has been a key to its identity since founder John Boot opened a small herbalist store on Goose Gate in 1849. The group has been based at its 112-hectare headquarters site in Beeston since 1927. One Boots worker says: 'There won't be any regret we are no longer part of Walgreens. We have always been seen as a small part of that group. Before that Boots was Boots.' However, he adds: 'The fear is more stores close or there is yet another round of reducing staff in stores.' Another staff member says: 'Private equity are in it to make money as quickly as they can and are not really bothered about the consequences.' On Beeston high street, several locals say they used to work for Boots or have friends and family who still do. Jessica Stanley, 38, is suspicious of private equity firms 'because they are thinking about shareholder profits and not value of the business to the community. I guess I would be concerned there's a risk the company might be gutted.' Michelle Aduhene, 50, compares any potential change to the closure of bicycle maker Raleigh's Nottingham factory two decades ago. 'They built the university [on the old factory site] and that brought students, but does it bring money? It's worrying.' She points to the hit local businesses that also benefit from Boots' employees' trade could face. However, several staff tell the Observer they would be quite relaxed about a new regime as they have already survived a lot of cost-cutting and restructuring under its various owners, including Walgreens. 'It all happens so far up the line it won't affect us,' says one. The vast Boots campus still hints at a huge empire – but much of it is now rented out to other companies, some buildings lie empty and about 17 hectares have been sold off to builder Keepmoat for redevelopment into housing. Occupants are continuing to move out. Alliance Healthcare, the owner of Boots's former wholesale arm, announced plans to close its warehouse in Beeston next year, shortly after Fareva – the French owner of Boots's former manufacturing arm, which makes products for its No7, Soltan and Liz Earle ranges – exited late last year. There are rumours that more of the site could be sold for redevelopment, with Boots apparently assessing its vacant properties, although the company does not confirm this. Some locals feared a big swathe of student housing could be built, but local property experts say it would be tough to sell off large expanses of the site because of its complex nature. It has several stunning listed buildings – including the art-deco former factory, which is now MediCity, a hub for biotechnology, health and beauty startups which has a number of spaces vacant – and modernist glass monolith D10, which until recently housed Fareva. With Boots's manufacturing and wholesale businesses already hived off, there are few divisions left that can be easily sold. However, the own-label beauty brands, including Liz Earle and No7, became a separate company about 10 years ago and could potentially be attractive to an international beauty specialist, according to industry experts. The No7 brand is now sold in the US via Walgreens and other retailers, but is also seen as key to Boots's appeal in Britain. Store closures then would be an obvious way to go – as evidenced by the complete exit of rival chemist chain Lloyds from the high street after it was bought by private equity. Boots has already closed more than 300 outlets in recent years but it still has a very high number of stores. Any new owner is likely to look closely at the chain's property footprint, given the rising costs of high street retail, the shift of trade to online, and competition from discounters such as Savers, Lidl and Home Bargains. Over a quarter (27%) of Boots staff surveyed in a poll by campaign group Organise said they feared their job would be less secure and more than a third (36%) said they felt conditions could get worse in the event of a takeover. As one worker puts it: 'Because the high street is a very uncertain place at the moment, who is going to be looking to buy into a retailer with such a huge high street presence?' A listing on the stock exchange is seen as unlikely, given the current volatile situation on public markets and scepticism about growth in consumer companies, so a private sale is seen as more likely. 'Boots has improved dramatically in recent years,' says one source who knows the business well, pointing to the chain's greater focus on beauty counters and use of technology to grab a share of the online market. 'But Boots is very hard to grow as it has got such big market share in most of the markets it is in, and is incessantly under attack from emerging market players. As its market share is so high there is almost only one way to go. 'Someone could run it for cash and slowly underinvest in stores but it has been through that already.' In recent years, the brand has ridden a strong beauty market, reporting a 1.6% rise in sales in the three months to the end of February. Underlying sales at its pharmacies and its retail business, excluding the impact of currency and store closures, both rose about 5%, while sales soared 20%. But staff say that government contracts for pharmacy services make it difficult to cover costs, and Boots has already reduced pharmacy trading hours in many stores, so counters can be closed even when the rest of the store is open. Workers also point to poor maintenance in some stores and fewer staff, meaning tills are unattended or increasingly automated, which they say is not good for older shoppers. Previously interested parties include India's Reliance Industries and restructuring expert Apollo Global Management. CVC, Bain Capital and Asda owner TDR Capital also looked at the group but balked at the then mooted price of at least £5bn. Stefano Pessina, the entrepreneur behind all the deals at Boots since it merged with his Alliance Unichem business in 2006, is likely to be kingmaker. Those who know him suggest he could keep a stake in Boots and may want to be involved in its future – if he sees a way to make money from it. Not everyone is so sceptical. Another source who knows Boots well argues: 'There is as much a case for investment as there is for stopping it. It could go more digital.' With an ageing UK population and the Labour government's increased focus on primary healthcare, where Boots has been increasingly offering services such as obesity clinics and vaccinations, there are new areas for potential growth. 'Boots is thriving, not just surviving, and if it was able to use more of its cash, who knows? There is a change in emphasis in the UK and, on a 10-year view, there is a big opportunity,' says the source.
Associated Press
08-04-2025
- Business
- Associated Press
The Boulder Group announced the release of its 1st Quarter Triple Net Lease Research Report
Cap Rates in Single Tenant Net Lease Sector Rise for 12th Straight Quarter in Q1 2025 The Boulder Group announced the release of its 1st Quarter Net Lease Research Report today. The report features a comprehensive format with specific net lease sector information. Cap rates in the single tenant net lease sector increased for the 12th consecutive quarter for the overall net lease sector in the first quarter of 2025. Overall cap rates rose to 6.78%, representing a modest two basis point increase from the previous quarter. Single tenant cap rates increased to 6.56% (+4 bps) for retail, 7.80% (+2 bps) for office and 7.23% (unchanged) for industrial. 'The persistent upward trend in net lease cap rates now spans three years,' says Randy Blankstein, President, The Boulder Group. 'This is reflective of sustained high borrowing costs and inflationary pressures.' Property supply in the single tenant sector increased by more than 5% when compared to the prior quarter. Over the past two years supply has surged nearly 30%, a consequence of lessened transaction velocity and a pricing gap between buyers and sellers. 'Of all the net lease sub-sectors, the drug store sector is experiencing the slowest transaction volume and a glut of supply' adds Jimmy Goodman, Partner, The Boulder Group. Recent news regarding private equity company Sycamore Partners acquisition of Walgreens further compounded the issue. Uncertainty over Sycamore's long-term strategy has deepened the sub-sector's supply and slowed deal flow. Accordingly, cap rates in the drug store sector increased by 44 basis points quarter over quarter with limited transactions. 'Cap rates in the drug store sector increased by 44 basis points quarter over quarter with limited transactions,' John Feeney, Senior Vice President, The Boulder Group adds. The net lease market continues to adjust to the higher rate environment experienced in recent years. Transaction volume increased in the fourth quarter and the expectation is that there will be a slight uptick in volume in 2025. Investors will be carefully monitoring the capital markets following the Fed's decision to hold rates steady following their March meeting. If short term rates continue to drop in the near term and uncertainty remains in the overall financial markets, net lease activity is expected to increase but nowhere near pricing or transactions volume in peak times (2020-2021). To view the full report: About The Boulder Group The Boulder Group is a boutique, Chicago-based investment real estate services firm specializing in transaction and advisory services for single tenant net lease properties. Founded in 1997, the firm has closed over $9 billion of net lease property transactions. The firm provides a full range of brokerage, research, advisory, and financing services nationwide. The level of annual, single-tenant transaction volume consistently ranks the firm in the top 10 companies nationally, according to industry benchmarks determined by CoStar and Real Capital Analytics. Media Contact Company Name: The Boulder Group Contact Person: Randy Blankstein Email: Send Email Phone: 8478816388 Address:3520 Lake Avenue Suite 203 City: Wilmette State: Illinois Country: United States Website: Press Release Distributed by To view the original version on ABNewswire visit: The Boulder Group announced the release of its 1st Quarter Triple Net Lease Research Report
