Employee healthcare navigation company Transcarent plans to acquire health benefits platform Accolade in a deal valued at $621 million, the company announced Wednesday.
Transcarent will acquire Accolade for $7.03 per share in cash and represents a premium of approximately 110% over Accolade's closing stock price on Tuesday.
Transcarent will finance the transaction through a fully-committed equity financing led by General Catalyst and Glen Tullman’s 62 Ventures.
The transaction is expected to close in the second quarter. After the deal closes, Accolade will become a privately held company and its common stock will no longer be listed on Nasdaq.
The deal, which has been unanimously approved by the Boards of Directors of both companies, will enhance Transcarent's mission to make it easy for people to access high-quality, affordable health and care, company executives said in a press release.
The combined company will reach more than 1,400 employer and payer clients, and the combination of Accolade's capabilities with Transcarent's solutions will "deliver a more personalized and engaging member experience," executives said.
For fiscal year 2024, which ended February 29, Accolade brought in $414 million in revenue and logged a net loss of $100 million.
Accolade provides care navigation and patient engagement tools. The transaction will integrate Transcarent's generative AI-powered WayFinding and care experience solutions, which target high-cost specialty areas like cancer care, surgery care and weight health, along with its pharmacy benefit offering with Accolade’s personalized healthcare platform and experience in advocacy, expert medical opinions and primary care.
Members will have one place to go for their health and care needs with the goal of delivering a better experience, higher-quality care, and lower costs for health consumers, the companies who employ them, and the payers who support them, Transcarent executives said.
Glen Tullman, CEO of Transcarent, said the acquisition of Accolade marked a "perfect fit," as it adds "great people" to the Transcarent team and "expands choice and access" for the company's clients, their employees and their families.
“By integrating our recently introduced generative AI-powered WayFinding and comprehensive care experiences with Accolade’s advocacy, expert medical opinions, and primary care, we have a solution that finally makes it easy to access high-quality health and care and deliver lower costs for the people who pay for care – employers, and all of us," Tullman said in a statement.
"Already this January, we added more than 500,000 members to our platform including some of the most innovative, and respected employers in the world, signaling their interest in a single comprehensive platform to make it easy for their people and their companies to improve their health and care experience, deliver better health outcomes, and drive down costs," he said.
Founded in 2007, Accolade provides a health benefits platform for employers aimed at improving health outcomes and controlling costs by helping consumers make better, data-driven decisions. The company went public in July 2020, raising $220 million in its initial public offering.
It has expanded its capabilities through several acquisitions. In January 2021, Accolade acquired 2nd.MD, a company that helps patients get expert medical opinions via video or phone, in a $460 million deal. Later that same year, the company bought virtual primary care service PlushCare in a deal valued at $450 million.
Tullman, founder of Livongo, launched Transcarent in March 2021 to tackle the employer-sponsored benefits space. The startup uses a combination of software, technology and data science to provide members with health navigation, virtual care and bundled providers.
Last May, the company pocketed $126 million in series D funding to build out its artificial intelligence capabilities. Transcarent has brought in $450 million in total funding at a valuation of about $2.2 billion.
"In our view, the combination of Transcarent and Accolade makes strategic sense and will provide greater opportunities for innovation for self-insured employers and health plans, which remain under significant pressure to manage healthcare cost trend," Ryan Daniels, partner at William Blair and group head of healthcare technology and services, wrote in a research note.
"While Accolade and Transcarent are leaders in the care navigation space, we do not expect significant antitrust pushback as there will still be several large-scale players in the industry (e.g., Quantum Health, Included Health, and Personify Health)," Daniels wrote.
The Accolade acquisition also could mark the beginning of an M&A wave for digital health, Daniels wrote.
"We continue to see compelling valuation multiples for publicly equities across the space. Importantly, we also believe healthcare innovation requires large-scale platforms, as opposed to smaller point solutions, which benefit from economies of scale and a broader reach to truly impact patient outcomes and healthcare costs. This, in our view, supports the thesis behind further consolidation in the market," he wrote in the research note.