CVS Health Corporation, the pharmacy-healthcare hybrid, has been under pressure from some of its investors who have been pushing for a breakup of the company. The reason cited for this push is that the immense complexity of modern CVS – a corporation with over 10,000 pharmacies, millions of square feet of commercial retail space, a major insurance company, and a pharmacy benefits management business – has made the company unfocused and underperforming.
But such a breakup could be a risky move. Here are some reasons:
1. Financial Impact: Restructuring a conglomerate of CVS’s scale could be financially costly. There will be significant expenses associated with the breakup, including legal fees, penalties for the termination of certain contracts, as well as other potential costs.
2. Disruption of Operations: Breaking up could possibly disrupt the continuity of its operations. CVS has spent years integrating its various units, which also includes information technology, supply chain, HR, and many others. Separating these units could cause operational disruptions that might take a while to resolve.
3. Loss of Synergies: Currently, CVS operates on the principle of synergy. Its insurance arm benefits from both the pharmacies and the pharmacy benefits management business. Without these combined operations, the company might lose the competitive advantage it currently holds in the market.
4. Regulatory Risks: Any restructuring would have to be approved by regulators. There is always a risk that any one of the divested entities could run afoul of regulatory requirements, creating
