Healthcare Financial Insights

Noteworthy M&A Transactions – May 2020

June 11, 2020

As the United States and the rest of the world test out strategies for reopening the global economy, we have started to see some positive momentum within certain pockets of healthcare. Across healthcare services, for example, home health visits, primary care visits, dental procedures and certain elective surgeries all registered positive week-on-week growth beginning in early May. As more and more businesses get back to normal levels of operations, we expect M&A activity to gain additional momentum in the coming months as well.

Looking back on the month of May, we explore three important themes that shaped M&A and capital raising activities: 

  1. Significant Activity within the Durable Medical Equipment (DME) Space:  As private equity firms look to find successful investing strategies across lower cost of care settings, DME has become a hot target. Private equity firms are looking at ways to consolidate DME specialties and build around related comorbidities. One company that has received a lot of recent attention is AdaptHealth. The company, which received a $190M investment from One Equity Partners, has closed over 60 acquisitions since 2012 across diabetes, sleep, and respiratory conditions, including the May acquisitions of Solara and ActivStyle. AdaptHealth and a number of other DME providers have also benefited from the recent COVID-19 developments, as patients require in-home equipment to support their high-cost chronic diseases. Additionally, there are new entrants within DME that offer tech-enabled solutions to enhance cost savings and the overall patient experience. Tomorrow Health, which recently raised a $7.5M Series A round, is one such company. Tomorrow Health’s platform has integrated cost savings tools, care coordination, and an online retail website into one platform that can lower costs, increase efficiency, and create better patient outcomes. TripleTree expects to see continued interest in DME providers as investors continue to search for attractive opportunities. We’ll be publishing a comprehensive DME market update in the coming weeks.
  2. Continued Acceleration and Demand for Innovative Virtual & Remote Health Assets: As the current crisis continues to push care into a home or virtual-based setting, a number of fast-growing companies have capitalized on recent momentum. Investors are hoping that COVID-19 can accelerate the adoption curve of virtual health assets, resulting in a permanent shift in care settings. This has been seen through another month of continued growth investments in telehealth, digital therapeutics, and home-based testing platforms. TripleTree has published a series of recent virtual health insights highlighting these trends, including COVID-19’s impact on behavioral health and virtual health’s impact on care delivery. Going forward, TripleTree expects to see continued demand in telehealth and virtual care as policies and patient preferences shift.
  3. Care Coordination Continues into the Post-Acute Setting: The post-acute care setting continues to be one of the most variable when it comes to costs and patient outcomes. With the continued move towards value-based care systems and an aging population, healthcare companies are looking to expand care coordination to the post-acute setting in an effort to further improve the number of high-quality outcomes while containing costs. Over the last month we saw this take shape through acquisitions that bolster data and digital capabilities as well as expand the capabilities of service providers into the post-acute setting. Optum’s acquisition of NaviHealth highlights both of these trends. NaviHealth utilizes data, analytics, and expert clinical staff to guide patients to the proper post-acute care setting and recovery plan. Combining this with Optum’s community-based delivery systems allows Optum to use data and analytics at every stage of the care continuum and effectively coordinate care of its population from first-visit through the post-acute setting, reducing costs and producing better outcomes. Opportunities to create these innovative combinations will continue to expand as companies pursue the next phase of care delivery.

Several transactions in May aligned with these themes:

  • AdaptHealth (NASDAQ: AHCO), a full-service distributor of home healthcare equipment and medical supplies, acquired Solara Medical Supplies, a distributor of continuous glucose monitors, for $425mm. In addition, AdaptHealth acquired ActivStyle, a direct-to-consumer supplier of incontinence and urology products, for $62mm. Solara and ActivStyle will further AdaptHealth’s vision of becoming a leading provider of connected health solutions and care in the home. ActivStyle’s sale represents an exit for The Riverside Company.
  • Tomorrow Health, a startup that helps patients navigate in-home healthcare resources including equipment and supplies, raised $7.5M of seed funding from Andreessen Horowitz. The company, which is led by former Oscar Health executive Vijay Kedar and Casper co-founder Gabriel Flateman, aims to simplify the process of securing products instrumental to caring for patients at the home.
  • Amwell, a Boston-based telehealth platform, announced that it has raised $194M in Series C financing from early investors including Allianz X and Takeda. Since the COVID-19 breakout, Amwell has facilitated as many as 45,000 telehealth visits per day and has partnered with more than 240 health systems. The company plans to use the proceeds to invest in technology and operations to support continued growth.
  • Mindstrong, a digital therapeutic platform for serious mental health conditions that uses a multimodal approach to treat mental health, raised $100M in Series C funding backed by Optum Ventures, Foresite Capital Management, Arch Venture Partners, General Catalyst, What If Ventures, 8VC, and Bezos Expedition. This round of funding will more than double Mindstrong’s previous funding total, having raised $60M historically. The company plans to use the latest funds to further scale its business as it capitalizes on recent market momentum.
  • LetsGetChecked, a provider of at-home testing kits, including antibody and PCR tests for COVID-19, has raised $71M in new funding co-led by Illumina Ventures and HLM Venture Partners. The company has managed to avoid the supply chain issues that have plagued other at-home testing companies.
  • Carbon Health, a San Francisco-based mobile connected healthcare network, raised $26M in new Series B funding from insider DCVC. Carbon raised $30M in a Series B round led by Brookfield Asset Management in June 2019, but extended the round, helping the business triple its headcount to 300+ employees as the company focuses on testing and care during the COVID pandemic.
  • Vida Health, a San Francisco-based provider of virtual care software for physical and behavioral health, raised $25M. Ally Bridge Group led the round, and was joined by return backers AME Cloud Ventures, Aspect Ventures, Canvas Ventures, NGP Capital, Webb Investment Network, and Workday Ventures. The new financing will be used to scale the company’s sale and marketing teams, as well expand its nationwide network of health providers.
  • NaviHealth, a Brentwood-based post-acute care management company, has been sold to UnitedHealth Group subsidiary OptumHealth Inc. While Optum did not disclose terms of the deal, sources expect it to be more than $1 billion. The deal will allow NaviHealth to innovate and grow its programs faster in order to improve the lives of members.

TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and let us know what you think!

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M&A, Transactions