Walgreens Deal Leads Parade of Take-Private Transactions

Flu season has hit the United States with a vengeance this year. The Centers for Disease Control and Prevention is reporting sharp year-over-year increases in its estimates of indicators such as flu-related hospitalizations for the 2024-2025 cycle.

Under similar circumstances 10 years ago, the drugstore chain Walgreens would likely be struggling to keep its shelves stocked with over-the-counter supplies for sick customers descending on its stores in droves. Today, however, the flu-afflicted are ordering their remedies online from competitors like Amazon. Factor in other shifts in health care, and Walgreens has become a shell of what it was a decade ago. The $23.7 billion value of a recently announced deal with private-equity firm Sycamore represents less than a quarter of Walgreens’ 2015 market capitalization of $106 billion.

Walgreens joined a slew of companies involved in take-private transactions in recent months, including:

• Patterson Companies Inc., a dental and animal health distributor acquired by health care investor Patient Square Capital for approximately $4.1 billion;
• Retail chain Nordstrom Inc., which was purchased by members of the Nordstrom family and El Puerto de Liverpool, S.A.B. de C.V. at a price of approximately $6.25 billion;
• Information technology company SolarWinds Corporation, which was bought by Turn/River Capital for $4.4 billion;
• Altus Power Inc., a solar power provider that alternative asset manager TPG snapped up for $2.2 billion; and
• Aerospace manufacturer Triumph Group Inc., which struck a deal to be acquired by affiliates of private-equity firms Warburg Pincus and Berkshire Partners for $3 billion.

The trend of companies going private stands in stark contrast to the direct efforts of the Securities and Exchange Commission to encourage more companies to join the ranks of publicly traded corporations. Earlier this month, the SEC revealed it is broadening the types of filings companies can submit to the agency for confidential review. The directive applies to Forms 10, 20-F or 40-F at the time when companies first register their securities. The SEC also said if a business is merging with a special purpose acquisition company in what is known as a “de-SPAC” transaction, confidential review will apply. Additionally, so long as companies eventually disclose the names of their underwriters in future public filings, they may leave them off the drafts of their registration statements.

So, what is stopping more companies from holding IPOs? First, the market isn’t sending welcoming signals. The stocks of some notable IPOs recently have ended up trading below their offer prices on day one, for instance.

Meanwhile, companies considering IPOs don’t seem keen to jump into the public markets as concerns about the broader economy mount. Worsening inflation would be rough enough to keep companies on the sidelines, but evolving U.S. tariff policy and a blitz of revised regulations appear to have shaken confidence in investors’ near-term outlook.

Some experts argue that the SEC should look in the mirror to identify the culprit behind companies’ reluctance to go public. Benjamin Schiffrin, a former associate general counsel at the SEC and a current specialist in securities policy with the non-profit group Better Markets, has penned a paper titled “The SEC is Killing IPOs.” In it, he claims exemptions allowing companies to peddle equity or debt securities without first registering them with the agency are the problem. The companies can acquire fresh capital, in other words, and avoid facing the same level of disclosures mandated by the traditional IPO process.

All of which raises an important question: If companies can get an IPO-like outcome without holding an actual IPO, how long will it take for conventional IPOs to die?