Bored in the office staying way past I need to and was wondering about some of the biggest dick plays done in PE history. Sycamore’s takeover of Walgreens being larger than firm AUM is what got me thinking.
They don’t have to be super large $ wise, but there’s got to be some crazy “all-in” bets that have been made over the years.
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Based on the most helpful WSO content, one notable "big dick play" in private equity history is Sycamore Partners' acquisition of Staples for $6.9 billion. This deal stands out for several reasons:
Sector Challenges: The retail sector was under significant pressure, with many chains filing for bankruptcy (e.g., Gymboree, Sears Canada). Despite this, Sycamore made a bold move into a struggling industry.
Strategic Focus: Staples' business model was shifting, with about 65% of its revenue driven by B2B sales, which Sycamore likely saw as a stable and lucrative opportunity. Additionally, only a minority of Staples' products were sold in brick-and-mortar stores, with $10.6 billion in sales being delivered to customers versus $6.6 billion in-store sales.
Leveraged Buyout Scale: The deal was the largest leveraged buyout of the year, with Sycamore paying $10.25 per share in cash, representing a 20% premium from pre-sale rumors. The financing involved major banks like UBS, BofA Merrill Lynch, Deutsche Bank, and others.
Operational Challenges: Staples had been experiencing declining sales and gross profits for four consecutive years, alongside a steady reduction in the number of stores. Sycamore's bet was not just financial but operational, requiring significant cost-cutting and strategic realignment.
This acquisition exemplifies a high-stakes, "all-in" private equity move, showcasing Sycamore's confidence in their ability to turn around a struggling but strategically valuable business.
Sources: Sycamore Acquires Staples for $6.9 Billion in Largest Buyout of the Year, https://www.wallstreetoasis.com/forum/investing/please-swipe-right?customgpt=1
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