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BFD Expert Voices - Health Tech Deals

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Amazon, CVS, Option Care Health and United Health are among the reported bidders for Signify Health (NYSE: SGFY), a Dallas value-based care company that could fetch up to $8 billion.

Why it matters: After emerging as a health care player over the past several years, the new reports  — combined with Amazon's recent One Medical buy — cement the tech giant as a major player in health-related M&A. 

Amazon's proposed ONEM deal would grant it major scale — helping shore up its expertise in consumer preferences, expand existing efforts in primary care and gain a foothold in Medicare Advantage.

Yes, and: Amazon has made moves in the value-based care space before via its failed cost-savings venture with JPMorgan and Berkshire Hathaway.

Yes, but: Amazon's potential Signify bid could also give antitrust regulators new avenues to pursue — and the retail giant is already fending off the FTC with its proposed acquisition of Roomba.

Speaking of, while UNH is a prolific health care buyer, its ongoing antitrust trial on its proposed merger with Change Healthcare casts a cloud on a potential Signify deal. 

Of note: Sources say private equity has been circling Signify as well, but many financial sponsors have been cut from the process — even at strong valuation levels. 

Goldman Sachs and Deutsche Bank are advising Signify on the process, Axios previously reported. 

How (Signify) works: The company helps health systems and health plans move to VBC arrangements by creating risk contracts where it shares in both upside and downside risk.

By the numbers: New Mountain Capital holds a 54.7% stake in Signify and the company has a reported market value of $5 billion, per the WSJ yesterday.

Shares of Signify jumped more than 39% Monday morning on the latest reports.

Flashback: Signify last year raised $564 million in its IPO. 

A year later, it bought ACO builder Caravan Health for $250 million.

Last month, however, Signify unveiled plans to wind down its episodes of care business arm and exit a bundled payment program to focus on its more profitable home and community services division.

Prime threat level: Amazon already has access to roughly 44% of U.S. residents through Prime, according to a recent Trilliant Health report. 

In comparison, the largest health system in the country is HCA, which serves just 1% of Americans.

"No health system can match Amazon's ... scale in terms of the next interaction," Trilliant Health president and CEO Hal Andrews previously told Axios.

Between the lines: Signify would give Amazon access to yet another clinical network alongside the one it's gaining with One Medical — plus a mound of extra data from what Signify gathers to identify and prioritize patients who need care.

"Amazon's interest would seem to be about Signify's clinical network and data," write Cowen analysts Gary Taylor, Charles Rhyee, and others in a Monday note.

The intrigue: As disclosed in a recent SEC filing, Amazon previously indicated it would terminate conversations with One Medical if its interest was leaked. Does it care this time around? TBD.

💭 Our thought bubble: Now that Amazon has cast its health care anchor with ONEM, we suspect the retail health giant could look at buying a TPA in a bid to enter the health insurance market (particularly after Haven failed to take off). 

Independent TPAs include the likes of VC-backed Collective Health, and scaled PE-backed players such as New Mountain's HealthComp and Water Street Capital's EMBS. 

"They don't need it to be a big [TPA] — they can scale it themselves," one industry banker tells us. "They need to pay for know-how."  

Amazon eyeing Signify

The reports cement the tech giant as a major player in health M&A.

Illustration of an empty doctor's outfit with the Amazon smile logo as the face. 

Health tech deals

Amazon, CVS, Option Care Health and United Health are among the <a class="gtmContentClick" data-vars-link-text="reported" data-vars-click-url="https://www.wsj.com/articles/amazon-among-bidders-for-signify-health-11661123042" data-vars-content-id="c65bbef8-daa8-44b4-b956-0d95a43e02ec" data-vars-headline="Amazon eyeing Signify" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.wsj.com/articles/amazon-among-bidders-for-signify-health-11661123042" target="_blank">reported</a> <a class="gtmContentClick" data-vars-link-text="bidders" data-vars-click-url="https://www.bloomberg.com/news/articles/2022-08-21/unitedhealth-amazon-are-said-to-be-among-bidders-for-signify#xj4y7vzkg" data-vars-content-id="c65bbef8-daa8-44b4-b956-0d95a43e02ec" data-vars-headline="Amazon eyeing Signify" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.bloomberg.com/news/articles/2022-08-21/unitedhealth-amazon-are-said-to-be-among-bidders-for-signify#xj4y7vzkg" target="_blank">bidders</a> for Signify Health (NYSE: SGFY), a Dallas value-based care company that could fetch up to $8 billion.Why it matters: After emerging as a health care player over the past several years, the new reports — combined with Amazon&#x27;s <a class="gtmContentClick" data-vars-link-text="recent One Medical buy" data-vars-click-url="https://www.axios.com/pro/health-tech-deals/2022/07/27/amazon-one-medical-could-ignite-hybrid-care-war" data-vars-content-id="c65bbef8-daa8-44b4-b956-0d95a43e02ec" data-vars-headline="Amazon eyeing Signify" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/health-tech-deals/2022/07/27/amazon-one-medical-could-ignite-hybrid-care-war" target="_self">recent One Medical buy</a> — cement the tech giant as a major player in health-related M&amp;A.

Amazon eyeing Signify

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