Prescription for Trouble: Private Equity Steps in as Walgreens Flatlines

Walgreens is nearing a $10 billion take-private deal with Sycamore Partners, ending its 98-year public market run. 

The once–$100 billion drugstore giant has been in freefall, struggling with shrinking profits, regulatory scrutiny, and a retail model that no longer works.

The company still operates around 8,500 stores, but only 1 in 4 is profitable. As more customers order everyday essentials online, Walgreens has lost a key revenue stream: impulse purchases like snacks and makeup, which carry 15% higher margins than prescriptions. 

• Meanwhile, locking up merchandise to deter theft has only made shopping more frustrating. “When you lock things up … you don’t sell as many of them,” CEO Tim Wentworth admitted.

Competitor CVS has attempted to diversify with insurance and pharmacy benefits, but even it isn’t immune to retail’s decline — reporting a 45% drop in net income in 2024. For Walgreens, going private could offer a chance to restructure away from Wall Street’s scrutiny.

The move here? Let bad leases expire and try to stabilize the business. If Sycamore plays this right, it could actually come out ahead.

This is the PE playbook — lever up, maximize upside, and if it fails, declare bankruptcy. Bondholders price in this possibility and seize assets if things go south. If that happens, the equity capital gets wiped out too — a risk that creates urgency and efficiency. Debt sharpens focus. 

I’m not one of those people who thinks PE ruins everything. Plenty of entrepreneurs have made money selling to them, and they tend to incentivize management well. On the other hand, venture capitalists, with a few exceptions, are mendacious f*cks who pretend to care and then wash the founders out. Speaking for a friend.

(from Scott Galloway's No Mercy No Malice newsletter)