Sword Health has confirmed it plans to acquire Headspace, a digital mental health company, in the fourth quarter of this year.
The companies have a signed agreement to move forward with a deal that will expand the virtual physical therapy platform deeper into the mental health space.
No details regarding the terms of the deal were shared, though earlier reporting based on regulatory filings and anonymous insiders (see below) described it as an all-cash deal valued between $200 million and $300 million.
"This is one of the most consequential moves we’ve made in our history,” Virgílio Bento, founder and CEO of Sword, said in Wednesday's announcement. “We are pioneering a new model of mental health care that understands each person, remembers their history, and anticipates their needs, 24/7."
The new announcement focused largely on the companies' combined reach and the additional capabilities that could result from an integration of their tech and clinical platforms.
On the former, they noted that Headspace today is a benefit offered at more than 20,000 companies "alongside health plans like Cigna Healthcare and Kaiser Permanente and partners like the NBA." Sword is used at over 2,500 "of the world’s most sophisticated organizations, including sovereign governments, the U.S. military, and the largest Fortune 500 companies."
Meanwhile, Headspace's 15-year business has yielded 84 peer-reviewed studies on its impact and "extraordinary trust" with users, the companies said. And Sword recently built its own proprietary foundational models for mental healthcare delivery, and last year used those models and research to launch a mental health tool, AI Care, that has since reached a million people.
"With the integration of Sword’s clinical intelligence, Headspace’s platform will gain more personalization, earlier identification of member needs, seamless navigation, and continuous support across the mental health journey," the announcement reads. "For employers, health plans and governments seeking to improve population health, the combined mental health solution will deliver a connected care experience, harnessing Headspace’s care network of more than 15,000 providers."
The close of the deal is subject to customary closing conditions.
Aug. 26
Sword Health to acquire Headspace in all-cash deal
Virtual physical therapy platform Sword Health is planning to acquire digital mental health company Headspace in an all-cash deal, according to a regulatory filing from the latter.
The notice of a material change to the Massachusetts Health Policy Commission was filed in late July but was recently spotted by Healthcare Dealflow. It outlines Sept. 14 as the proposed effective date of the transaction, in which Headspace's parent company, OrangeDot, will merge with a temporary entity and become a wholly owned subsidiary of Sword Health.
No price was given in the filing, though Axios reports that the deal will run somewhere between $200 million and $300 million—a substantial valuation drop since the company’s October 2021 merger with fellow mental health platform Ginger outlined a combined value of $3 billion.
To date, Headspace had raised $321 million from investors, whereas Sword Health had pulled in just under $500 million, according to Crunchbase. Sword Health’s $40 million raise last year placed its valuation at about $4 billion.
Headspace, best known for its app, offers a slew of behavioral health services through consumer-facing channels and via enterprise contracts with employers and health plans. Alongside on-demand mindfulness and wellness tools, it also delivers virtual sessions with licensed therapists and psychiatrists. The company and its affiliated medical practices have 598 total employees, 418 of whom are full-time.
Sword Health got its start in 2015 as a digital musculoskeletal health platform, and in more recent years has been branching out its business lines. For instance, last year’s raise coincided with an expansion into the mental health space when it launched an AI-powered mental health tool, called Mind.
Headspace, in its filing, said its current service offerings will continue uninterrupted through the proposed transaction. While the companies are expecting “integration benefits” from combining their platforms, Headspace wrote that it “expects to continue operating its business substantially as it currently exists, preserving its existing virtual service offerings, nationwide geographic reach and relationships with customers and payers.”
“Integration planning remains ongoing, and the combined company anticipates that there may be reductions in corporate staff where functions are duplicative between the two organizations,” the filing reads. “Any such workforce reductions are expected to be limited to corporate functions and are not expected to affect patient care, customer or payer relationships, or the availability of clinical services.”
Headspace noted that both companies through July had also filed necessary regulatory reviews with the Federal Trade Commission and state officials in Oregon and Minnesota.
Fierce Healthcare has reached out to Headspace and Sword Health for additional information and will update this story with any response.