After the Teladoc/Livongo (TDOC/LVGO) merger, Credit Suisse https://www.credit-suisse.com conducted a catch-up call with TDOC/LVGO management. LVGO management reports that the company was not for sale and does not view the transaction with TDOC as a sale.
The management does view the TDOC/LVGO deal as a merger of two leaders in virtual care. LVGO gave a great deal of thought to how to grow the capabilities that the company would need to provide continuity to members. So TDOC was a natural choice in thinking about the potential for joining forces.
LVGO’s decision to combine with TDOC had nothing to do with competitive forces coming from CVS or UNH. Management notes that as a combined company, LVGO/TDOC will still do a lot of business with both CVS/UNH.
Separately, TDOC management also notes that COVID did not accelerate the timing on the deal. However, COVID accelerated the buy-in from each company’s clients and both of the companies saw a point in the future where either LVGO and TDOC could combine to become the undisputed leader in virtual care or pick up other assets/capabilities and end up competing. However, when looking at the similar cultures and visions for the two companies, it made a lot of sense to combine the companies and achieve the ultimate vision more quickly.
TDOC notes that most of the revenue synergies opportunities exist from selling into the existing client base in the U.S, but international opportunities represent a large opportunity as well for the two companies.
With respect to revenue synergies, analysts asked management if any potential synergies would benefit the provider market? Providers are now encouraged and are being reimbursed when using RPM devices and tools. Also, TDOC now also has a strong presence in the market with the InTouch Health transaction.
Assuming 80% of the targeted $0.5 billion synergies are tied to cross selling to TDOC’s client base, it would imply that the company needs to enroll 515K members in the program from TDOC’s client base by 2025, versus LVGO’s current membership base of 410K. Also, TDOC/LVGO are working on a reseller agreement so that the two companies can begin to approach the combined client base before the transaction closes.
For more information and to provide feedback, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.