Amwell's rumored Talkspace takeover could spur more mental health mergers
Amwell's rumored Talkspace takeover could spur more mental health mergers
Telehealth giant Amwell's reported buyout discussions with Talkspace would signal another blow to the prospects of the formerly frenzied SPAC market, industry investors and CEOs tell Axios.
Why it matters: Beyond the threat to SPACs, it could portend a wave of M&A in digital behavioral health, a sector that's had mixed results over the past few years.
"This may be the start of serious consolidation," GSR Ventures partner Justin Norden tells Axios, "not only in the mental health space, but [across] tech-enabled services more broadly."
- "The valuation reset in the digital health space will lead to further M&A activity, particularly for names like [Talkspace] that are narrow point solutions that may be better scaled under a larger parent company," SVB Securities analyst Stephanie Davis wrote in a November research note.
Details: Israeli business publication Calcalist reported Sunday that Amwell is in discussions to buy Talkspace, the first publicly traded virtual behavioral health company, for $1.50 per share, valuing Talkspace at roughly $200 million.
- The figure reflected a 150% premium over Talkspace's share price of 60 cents per share at Friday's close. The stock has climbed to 88 cents per share since, bringing the premium to around 70%.
- Talkspace in May received (and rejected) a near $500 million offer from Mindpath, Axios scooped.
- Amwell had approached Talkspace this year with a buyout offer that was promptly rejected even before numbers were discussed, Seeking Alpha reported in June.
Catch up quick: Talkspace last year went public through a SPAC deal that valued it at $1.4 billion, including debt. But the company has struggled financially and operationally since.
- Post-SPAC, Talkspace's stock plummeted 90%.
- In November 2021, CEO Oren Frank stepped down.
- Talkspace last month got a de-listing warning letter from Nasdaq.
Between the lines: The potential tie-up reflects strong demand for mental health services, even as digital health valuations come down.
- "Talkspace is an example of a tech-enabled services business that rode peak digital health hype from the pandemic to go public in 2021 that could not keep up with the steep growth projections," Norden says.
- "Behavioral health is littered with unsustainable companies," says Iris Telehealth CEO Andy Flanagan, adding that if the deal rumors are true, "we hope this combination will allow [Talkspace users] to have continuity of care."
- RevWork CEO Denise Isaacson said that although it's "not surprising," the deal would "signal an upsurge of investment in digital transformation ... the only solution to the current mental health crisis."
Separately, the deal could present an opportunity for Amwell to strengthen its mental health portfolio against rival Teladoc, which in 2015 acquired BetterHelp.
State of play: Pandemic-era shortages of behavioral health providers fueled a proliferation of mental wellness startups.
Yes, but: Several behavioral health startups have struggled. For example:
Amwell and Talkspace declined to comment to Axios.
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