Nov 7, 2019

Walgreens Boots acquisition could be complicated, but size doesn't matter

Photo: Joe Raedle/Getty Images

"It would be very, very hard to make the math work." That was my gut reaction after seeing news that Walgreens Boots was in reported talks to be acquired by private equity, in what would be the largest leveraged buyout in history.

Driving the news: I wasn't alone. Blackstone Group CEO Steve Schwarzman said at a Reuters event that it's a "huge stretch doing things over $50 billion," and a Walgreens Boots deal would be closer to $70 billion (not even including assumed debt).

But, but, but: When private equity really wants a deal, it almost never lets size get in the way.

  • If equity is the problem, firms will club up and solicit massive co-investments from limited partners, non-traditional financial sponsors and/or strategics. Maybe they'll create a publicly-listed stub. It would be tough to find $20-$30 billion, but not impossible.
  • If debt is the problem ... Well, let's be honest: Debt is never really the problem. Leveraged lenders look wobbly from time to time, but it's always temporary.
  • Remember, even WeWork had $6 billion of committed debt (albeit tied to its ill-fated IPO). And count me among those who didn't think Dell could find new credit to buy EMC, until Silver Lake figured it out.

The bottom line: None of this means that a Walgreens Boots takeover is a sure bet, particularly given the political and pricing threats to pharmacies. But capital availability shouldn't be the deciding factor.

Go deeper: The risks of private equity in health care

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House hearing on private equity lands with a whimper

Sens. Elizabeth Warren and Bernie Sanders. Photos: Sarah Rice/Scott Olson/Getty Images

Tuesday's House of Representatives hearing on private equity landed with a whimper, after more than a week of escalating rhetoric from progressive Democrats.

Reality check: Even if Sen. Elizabeth Warren wins the presidency, she would have a tough time getting her "Stop Wall Street Looting Act" through Congress, with or without Democratic Party control of both chambers.

Go deeperArrowNov 20, 2019

How private equity is fueled by public pension plans

Illustration: Lazaro Gamio/Axios

Private equity's loudest political antagonists were back at it over the weekend, wrongly arguing that Taylor Swift's contract dispute is illustrative of the industry's rapaciousness.

What happened: While Sen. Elizabeth Warren and Rep. Alexandia Ocasio-Cortez each tweeted that private equity must be "reined in," they'll need to publicly wrestle at some point with how private equity is fueled by public pension systems that they otherwise support.

Go deeperArrowNov 18, 2019

Private equity on defense in Washington

What's believed to be the first congressional hearing in recent years squarely focused on the practices of private equity firms is happening later this morning.

Why it matters: Private equity is facing "the most serious political challenge it has seen in years," per the WSJ.

Go deeperArrowNov 19, 2019