CVS and Walgreens' struggles reveal failures in drugstore mergers
- CVS and Walgreens have pursued an aggressive M&A strategy in the last decade, with CVS's acquisitions leading to higher complexity in management.
- Both companies are facing declining stock values and retail performance, with CVS particularly pressured by activist shareholders to consider breaking up.
- The overall conclusion highlights the failure of these strategies to sustain core businesses and adapt to changing market demands.
In the past decade, CVS and Walgreens have engaged in aggressive mergers and acquisitions, aiming to expand their healthcare services and retail presence in the drugstore market. CVS’s acquisitions included Caremark in 2007, Aetna in 2018 for $68 billion, and other healthcare providers, but many of these later deals proved costly and complicated to manage effectively. On the other hand, Walgreens focused heavily on physical retail spaces, resulting in a problematic acquisition of Rite Aid stores in 2018. The impact of these moves has led to significant declines in share prices and operational challenges. Currently, CVS faces pressure from activist shareholders to consider breaking up the company to improve financial performance, while Walgreens deals with consequences from its failed ventures and struggles to sell off underperforming assets like Boots. The cumulative result of these corporate strategies reveals a troubling trend: both companies have diverted focus from their core retail operations, failing to address dwindling customer engagement and weak retail sales across their chains. This has prompted a reevaluation of their business models and strategies in the increasingly competitive healthcare landscape.