If Walgreens sells to Private Equity, the deal could be under fire along with others

If Walgreens Boots Alliance goes ahead with a sale to private equity, the company could join other health care deals under scrutiny for selling out to such investors.

Earlier this week, a report came out that Walgreens is considering a sale to a private equity firm Sycamore Partners. If speculation comes to fruition, the deal could put the iconic drugstore chain and its thousands of pharmacies and healthcare services under private equity ownership.

The health care industry is ripe for consolidation, and sales to private equity in particular have attracted significant scrutiny from members of Congress, federal antitrust agencies and attorneys general.

Influential U.S. senators earlier this year launched investigations into private equity’s expanding role in owning and operating everything from hospitals and health care systems to doctor’s offices and clinics.

To take a May letter to Ascension Illinois, a nonprofit operator of 10 hospitals in the Chicago area, from Senator Chuck Grassley. The Iowa Republican and senior member of the Senate Finance Committee said he wants to know how private equity affects patients, health care quality and outcomes.

Grassley’s investigation comes amid increasing investigations by congressional committees, including one by U.S. Senator Ed Markey, a Massachusetts Democrat and chairman of the Senate Subcommittee on Primary Health and Pension Securitywhich has “targeted the hundreds of billions spent by private equity to gobble up doctors’ offices, hospitals, labs and nursing homes across the country,” the Washington Post reported in May.

Critics of private equity’s involvement in healthcare were quick to point out the possibility of Walgreens selling to Sycamore.

“Private equity has invested more than $1 trillion in the U.S. healthcare industry over the past decade, touching virtually every corner of the industry,” the group said. Private Equity Stakeholder Projectsaid Wednesday about the potential private equity takeover of Walgreens. “This is despite the fact that private equity investments in healthcare companies carry significant risks for patients, employees and investors. The typical playbook for private equity investments can lead to behavior that compromises patient care increases the bankruptcy risk.”

Sycamore Partners specializes in “retail and consumer investments,” according to the company’s website. The Wall Street Journal Report indicated that other partners may be needed to acquire Walgreens given the size of the company, which owns more than 12,000 drugstores in the U.S., Europe and Latin America.

In turn, other reports following the potential acquisition of Sycamore predicted a new private equity owner would “aggressively cut costs” including job losses and store closures.

But Walgreens has already launched a major cost-cutting plan and closed hundreds of stores. In October, Walgreens said it will close 1,200 stores over three years in an effort to return to long-term profitability and growth.

Meanwhile, it remains unclear whether Walgreens will sell to private equity at all, and a company spokesperson declined to comment on “rumors/speculation.”

“While we believe a PE acquisition of WBA is possible, given that the company would have additional flexibility to address operating headwinds in the private market, coupled with deal-friendly covenants that could allow the acquirer to To assume WBA’s current debt, we also do not believe a deal is a slam-dunk,” healthcare analyst Ann Hynes of Mizuho Americas wrote in a research note on Wednesday.