CVS is under pressure and considering a breakup. Here’s why that could be risky

CVS Health Corp., the health care giant, is exploring the possibility of a major corporate breakup following pressure from big stakeholders who believe the company's businesses would be worth more separately than they are together. However, this process could be fraught with risks and challenges. 1. Integration Costs: CVS has spent billions of dollars integrating its retail pharmacies, Aetna health-insurance unit and pharmacy-benefits manager. It may lose a lot of investments in untangling these shared services in the event of a breakup. 2. Operational Complexities: The current structure allows CVS to coordinate care among its distinct arms, enhancing patient experience and controlling costs. Splitting the company could lead to increased operational complexity and an escalation in costs. 3. Regulatory Issues: CVS might face regulatory issues if they decide to break up the businesses. They might have to seek new licenses and meet distinct regulatory requirements for each separate entity. 4. Loss of synergies: The breakup could hamper CVS' goals of creating a more integrated healthcare company where different segments work together to achieve cost-savings and efficiency. This could lead to competitive disadvantage and further strain on profits. 5. Market Risks: It's uncertain how the market will react to a breakup, and there could be unintended consequences including stringent competition and fluctuating stock prices. Moreover, future growth plans might be impacted adversely. Therefore, while a breakup might provide immediate financial benefits, it exposes CVS to potential long-term operational and strategic risks.