What should Staples do differently now that it is going private?

Last week, long-struggling Staples agreed to be acquired by Sycamore Partners in a deal worth $6.9 billion. Going private is expected to help Staples tackle initiatives that may have disappointed public stock holders. Fred Foulkes, a professor of organizational behavior in the Boston University Questrom School of Business, told the Milford Daily News, “They can really do things that they think are right for them in the long run.” The moves may include significantly reducing expenses through layoffs, streamlining efforts and initiating further store closings. The company now has about 1,500 stores, down from approximately 2,300 in 2012. E-commerce is expected to account for 80 percent of revenues by 2020, up from 60 percent currently. Sycamore seems ready to support Staples’ new push to further reposition itself closer to business services. In May, Staples launched the first marketing campaign in its history focused on its B2B division rather than retail. The majority of its revenues come from deliveries to B2B accounts. Said Stefan Kaluzny, managing director of Sycamore Partners, in a statement, “We have tremendous confidence in CEO Shira Goodman and great respect for the Staples management team and are excited about this opportunity to partner with them to accelerate long-term profitability.” Staples could also seek to revisit its merger with Office Depot, which was blocked last April but may find a friendlier path under the Trump administration. While Staples is a category leader and well ahead of most other brick & mortars in shifting to online selling, businesses are using less paper, ink and other office supplies. The company also faces heightened competition in office supplies from Amazon Staples has relatively little debt (about $1 billion in total) and may be able to better handle the move to private ownership that has led to defaults recently by a number of other retailers. But some believe it depends on whether Sycamore uses any free cash to pay off the debt. Lauren Silva Laughlin wrote for Reuters, “Sycamore can prod the company to pay dividends or invest in propping up EBITDA — but probably not both.”

• Staples, Inc. Enters into Definitive Agreement to be Acquired by Sycamore Partners for $10.25 Per Share in Cash, or Approximately $6.9 Billion – Staples
• Staples to Sell for $6.9 Billion, and Its New Owner Has an Uphill Battle – The New York Times
• Staples in $6.9B deal to be acquired by Sycamore Partners – USA Today
• Staples' $6.9 bln buyout could end in the shredder – Reuters
• Staples purchase could mean store closings, employee cuts, experts say – Milford Daily News
• Sycamore Wagers $6.9 Billion That Staples Can Thrive Again – Bloomberg
• Will redirecting its focus from stores help Staples’ top and bottom – RetailWire