What's Behind the M&A Buzz in the Hospice Industry - MedCity News

Amid rumors that telemedicine company Amwell is study buy online therapy company Talkspace Industry experts seem somewhat torn on whether thepotential deal makes sense.

What is being reported is that Amuel would acquire Space for conversations for about $200 million at about $1.50 per share. This represents a sharp drop compared to the teletherapy company became public domain last year through a blank check deal with Hudson Executive Investment that valued Talkspace at $1.4 billion.

Amwell approached Talkspace in the past for acquisition, although Talkspace turned it down, Searching for Alpha reported earlier this year.

If the new rumors are true, will this acquisition make sense?

One venture capitalist “dismissed” the rumours. Amwell is more focused on providing technology that enables others to provide clinical services rather than offering clinical services, said Michael Greeley, co-founder and general partner of Flare Capital Partners.

“[Amwell] prides itself on being a kind of best-in-class technology provider and enabling a lot of these virtual services,” Greeley said in an interview. “I would be surprised if they made a specific investment in behavioral health clinical services … it’s not clear to me that horizontal technology providers will want to start buying one-off clinical services.”

While virtual care models will likely need to consolidate later, Greeley said he doesn’t expect a technology provider like Amwell to be the one to bring the companies together.

“What does the model look like moving forward? It may actually have a telehealth backbone like Amwell, or your insurance company may start collecting these things and package them as insurance products. That seems to me like a more obvious path where insurers are starting to take ownership of these solutions,” he said. “Maybe it’s Amazon or Walgreens or CVS, but I just don’t see it being a technology provider like Amwell.”

Another industry follower said he believed the rumours, but expressed skepticism about how Talkspace would fit into Amwell’s business model. Amwell is a B2B company, while Talkspace is both B2B and direct-to-consumer, the latter of which seems to be experiencing challenges. Blake Madden, founder of the industry newsletter Hospitalologysaid he doesn’t see the direct-to-consumer model working well for Amwell.

“The way I see it playing out is that Amwell wants to acquire Talkspace for their B2B relationships, and they have a lot of B2B relationships,” Madden said in an interview. “I think if Amwell can acquire Talkspace they will really focus on that B2B side and frankly I wouldn’t be surprised if they spin off the direct-to-consumer business or make it less of a priority because it seems to be a more stagnant business now.”

Others are less skeptical of the rumors, like Dan Gebremedhin, a partner of Flare Capital Partners. Gebremedhin said the acquisition would make sense for the companies, although he echoed Madden’s comments that Talkspace would likely move away from the direct-to-consumer side.

Talkspace has well north of $100 million in recurring revenue with a mix of large corporate contracts and direct-to-consumer business. Amwell focuses primarily on the enterprise and is therefore likely to sell cross-synergies,” Gebremedhin wrote in an email. “[I would] imagine that Talkspace will likely exit the D2C business over time and focus on the enterprise business, which appears to be close to two-thirds of total revenue.”

In direct contrast to Greeley, he added that Amwell may actually be looking to collect point solutions. And behavioral health is a priority for many healthcare companies.

“Amwell has built a platform-based solution and is now looking to integrate point solutions to provide clinically integrated solutions in addition to their existing virtual care platform … Behavioral health is among the top five needs of large healthcare enterprises and I would imagine that Amwell is hearing this in many of their existing and potential client contracts,” Gebremedhin said.

Another venture capital investor said she was not surprised by the rumours, although the purchase price represented a big change down from other recent M&A deals.

“Telemedicine players are looking to expand their reach, and behavioral health has long been considered the next logical move beyond urgent care and primary care,” Marissa Moore, a health technology investor at OMERS Ventures, wrote in an email. “This is not new. We have already seen Teladoc and Amwell do deals here. But what’s different now is that the power of negotiation has dramatically shifted back in favor of buyers. And this is reflected in the rumored purchase price for Talkspace.”

Moore’s colleague would not comment on the merits of the rumored deal, but stressed that consolidation is needed.

“I think it makes 100 percent sense that there could be more consolidation in the behavioral health market,” said Michael Yang, managing partner of OMERS Ventures. “Too many virtual mental health companies have been created in the last era and they are too small, unprofitable and challenged to differentiate themselves. It stands to reason that they simply cannot succeed. For the sake of patients, providers and everyone in the ecosystem, consolidation can help ensure that patients have consistent access to care and providers can have a longer relationship with patients, by virtue of the fact that future providers of these services are more stable organizations.”

As expected, Amwell and Talkspace declined to comment.

Photo: maxsattana, Getty Images

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