business news in context, analysis with attitude

Staples has made a deal to sell itself to private equity group Sycamore Partners for $6.9 billion, is a move that the New York Times describes as "the latest instance of a once-prominent name in retailing being laid low by the powerful forces reshaping how people shop (in other words: Amazon) ... Sycamore is acquiring a company that is squarely in decline. Sales and gross profits at Staples have fallen for each of the last four full years. At the same time, the company has been shrinking the number of stores it operates."

Staples had tried to compete by acquiring rival Office Depot, a move it thought would better position it to face off against the likes of Amazon. However, federal regulators successfully opposed that move on antitrust grounds. In Staples' view, that left it with few acceptable options.

The Times story notes that Staples "was an ideal target for a leveraged buyout ... Staples has very little debt, just about $1 billion in total. That healthy balance sheet will mean Sycamore — which will borrow much of the money it needs to fund its buyout — will not have to overload the company with a crushing debt burden."
KC's View:
Sycamore says that it is acquiring an "iconic brand," but it also is a brand in decline with lessening relevance. That's going to be an enormous challenge, especially because private equity likes to buy things to sell them ... and it is hard to imagine how it will be able to reverse Staples' fortunes. One suggestion is that it could make another attempt to acquire Office Depot, and hope that the Trump administration is more sympathetic than the Obama administration was.