Boots take over is likely to be the test case for private equity

News that Boots may well be taken over in the largest ever private equity deal in the UK broke this morning. Worth around 10 billion, it looks like it will happen.

The 100,000 Boots employees will be watching carefully, given the possible cost cutting that may come in once it goes private.

I spent a few hours with the CEO and the board last year, to discuss responsibility issues, and was very impressed when the CFO began lecturing SRI analysts on progress. Their CSR and environment people are top notch, and the current board, at least those remaining after the recent merger changes, really get responsible business.

Now that firms like KKR seem to be accepting they have to present a more civilised face to the world – Boots might be the test case for turning this into actions.

The question will be whether or not KKR’s business model is contrary to notions of responsible business, particularly on staff productivity and its links to employee numbers. Some studies, out recently, have said private equity has added more jobs than it has taken out. Discussions about the private equity industry code of conduct and the transparency agenda in general is still ongoing, and will be for some time to come.

Commentators this morning on the BBC pointed out that it will be hard to shave off divisions or businesses from Boots, and that costs are already well managed. So what will private equity do with their biggest ever deal in Europe to make more money? Perhaps it will be business as usual, and just keeping the profits. What happens then to Boots’ CSR team may provide an indication of intentions by KKR and Pessina.

KKR owning Boots will be the test case for private equity in the UK. Expect a robust debate and the eagle eye of unions and the media.

Toby Webb, Editor

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