Teladoc Health and Livongo Merger

Deal Overview

Acquirer: Teladoc

Teladoc-Livongo Market Capitalization Comparison

Source: S&P Capital IQ. Accurate as of Market Close 9/3/2020

Teladoc Health Overview

Teladoc is a leading provider of business-to-business virtual healthcare services through multimodal access points including mobile, web, and phone. The company’s value proposition is in its triaging capabilities; helping their enterprise clients identify which of their employees’ medical incidents require escalation, thus helping employers save money. Teladoc’s growth story to date is largely attributable to their strong execution of sales and distribution.

Graphic made by MergerSight M&A reporting team. (Note: S&P Capital IQ as of Market Close 9/3/2020; reviewed MD&A for unusual charges)

Livongo Overview

Livongo is a digital healthcare company that focuses on chronic conditions — most notably diabetes. Through their data science and health coaching competencies, the company is able to provide patients with more constant, real-time monitoring and support than in the current mechanisms of care delivery. Livongo’s business model is centered around partnering with providers and owning their patients’ care experience across their longitudinal journeys.

Graphic made by MergerSight M&A reporting team. (Note: S&P Capital IQ as of Market Close 9/3/2020; reviewed MD&A for unusual charges)

Projections and Assumptions

Short-term Consequences

The digital transformation of healthcare delivery has rapidly accelerated in the COVID-19 environment. The Teladoc-Livongo merger capitalizes on the strong near-term tailwinds, creating a dominant market leader in the healthcare IT vertical after the expected closing in Q4 of 2020. The provision of healthcare is a continuum, and the complementary nature of Teladoc and Livongo’s core competencies will help the combined company (entitled Teladoc) offer a suite of end-to-end services. More specifically, the addition of Livongo’s chronic care management expertise — particularly in diabetes — along with their refined AI and health coaching capabilities will solidify Teladoc as the one-stop virtual care marketplace. The consolidated platform is a comprehensive offering; the possibility of physician access is complemented by lower level support such as nursing coaches and Natural Language Processing chatbots. Patients will be able to access a wider spectrum of synchronous and asynchronous medical attention than in the current conventional care delivery model. Doctors and health systems will be able to manage their communities more proactively which should therefore help boost patient retention.

Long-term Upsides

From a long-term perspective, the combined company is well-positioned to capitalize on disruptive healthcare trends such as proactive management, virtual delivery, personalised care, and value-based compensation. By capturing a broader percentage of the market and bringing on more users, Teladoc will benefit from the resulting network effect. Simply put, more users mean more patient data to help refine the AI model over time. In theory, this should ultimately result in better outcomes for the patients on the platform as the AI models improve in accuracy, thus resulting in better management and diagnostic outcomes. More importantly, considering that the supply of a physicians’ time is scarce, the ability to triage incidents adds tremendous operational value. Doctors will be able to more clearly identify and prioritize patients in need of care. Enterprise clients who shoulder some of their employees’ medical costs will be able to save money through more informed triaging as relatively lower-order cases can be addressed by coaches, nurses, or even NLP systems.

Risks and Uncertainties

Post-Pandemic Regulation

Sources and Additional Reading

American Medical Association: “5 huge ways the pandemic has changed telemedicine”

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Aebjohn Tomas

Aebjohn Tomas

Tech. History. Healthcare. UChicago Senior. VC Fellow @ Dipper. Incoming @ J.P. Morgan. More about me: aebjohn.github.io