• Ariel Chen

Pandemic Fuels M&A in Telehealth

Earlier this month virtual healthcare provider Teladoc announced the purchase of Livongo, a mobile health management platform, for $18.5 billion in what amounted to the largest digital health deal in history. While the industry spotlight has been around this deal, other top telehealth companies capture transformational opportunities as well.

On Wednesday Aug 24th 2020, CloudMD Software & Services Inc. (TSXV:DOC)(OTCQB:DOCRF) a telehealth company seeking to revolutionize the delivery of healthcare to patients, revealed that it has entered into a binding agreement to acquire Re:Function Health Group Inc., a leading rehabilitation clinic network, with 7 clinics and 35 specialists and allied health professionals across British Columbia. Re:Function is a U.S. based medical clinic serving chronic care patients as a part of its broader strategy for entering the U.S. market with its comprehensive suite of telehealth products. One of the key goals for CloudMD with this acquisition is to start providing a single comprehensive stop for longitudinal healthcare for chronic and complex care patients in the U.S. CloudMD will integrate its telemedicine solutions throughout the clinics, layering on additional allied health and specialist functions to the platform. CloudMD's registered users will now have access to primary care Doctors, specialists, and a network of mental, occupational and physical health specialists. The Re:Function team also gives CloudMD's network of primary care physicians options to give patients referrals to extended care.

In the first quarter of 2020, there were 41 M&A transactions involving digital health companies. Why telehealth boom is fueled by acquisition these days?

When the telehealth industry is growing stronger day by day, constraints become more significant. Whoever can take the first step to address and resolve the problem has chance to grow fast and success in long term. For example, continuity of care and a patient centric model can only be achieved if the entire care team (all healthcare professionals) are empowering the patient with a comprehensive view of their healthcare record and in order to do so, the fragmentation of data needs to be addressed. The acquisition is mutually important in the shared vision to disrupt the current healthcare delivery system and to provide continuity of care across multiple verticals to ensure exceptional patient care. Investors act differently regarding the M&A activities in the industry. The funding trends may shift among digital health technologies. In addition, many investors lose interest in certain products and solutions which would have been funded in a pre-COVID world. Overall, investors favor entrepreneurs whose solutions either have a direct impact on a pandemic response or have a place of relevance in a changed world.

We expect to hear more M&A activities in the industry. Stay tuned.