HealthTech M&A Case Study Series: Best Buy + Current Health

Exec Summary:

In November 2021 US Consumer electronics company BestBuy acquired UK remote patient monitoring company Current Health. The press reports stated 'Best Buy acquired Current Health in October 2021 for $400 million.'

Best Buy stated in their Annual Report 'we acquired all of the outstanding shares of Current Health Ltd. (“Current Health”) for net cash consideration of $389 million. Best Buy also stated 'The acquired assets included $351 million of goodwill that was assigned to our Best Buy Health reporting unit and was not deductible for income tax purposes.'

The press widely reported Current Health's revenue for the year ended December 31, 2020 was $20 million.

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Financials:

$389 million net cash

$351 million of goodwill

$20 million annual revenue

x19.45 revenue multiple

EBITDA unknown

The Deal

Best Buy acquired Current Health in October 2021 for $400 million. The acquisition was part of Best Buy's broader strategy to expand its healthcare business.

Current Health is a Boston-based company that develops remote patient monitoring (RPM) technology. RPM is a healthcare delivery model that uses technology to monitor patients' health remotely. This can be done through wearable devices, sensors, or other methods. RPM can help to improve patient outcomes, reduce costs, and improve patient satisfaction.

Best Buy believes that the acquisition of Current Health will help it to become a leading provider of RPM solutions. The company plans to integrate Current Health's technology into its existing retail stores and online channels. This will allow Best Buy to offer its customers a wider range of healthcare services, including virtual visits with doctors and nurses.

The acquisition of Current Health is a significant move by Best Buy into the healthcare market. The company is betting that the growing demand for RPM will help it to grow its business and compete with other major retailers, such as Amazon.

Here are some of the reasons why Best Buy acquired Current Health:

• To expand its healthcare business: Best Buy has been looking to expand its healthcare business for some time. The acquisition of Current Health gives Best Buy a leading position in the RPM market.

• To provide better care for its customers: Best Buy believes that Current Health's technology can help it to provide better care for its customers. By monitoring patients' health remotely, Best Buy can identify potential health problems early on and intervene before they become serious.

• To compete with other retailers: Amazon is also investing heavily in the healthcare market. By acquiring Current Health, Best Buy is hoping to stay ahead of Amazon and other competitors.

The acquisition of Current Health is a significant move by Best Buy. It will be interesting to see how Best Buy integrates Current Health's technology into its existing retail stores and online channels. If successful, the acquisition could help Best Buy to become a leading provider of RPM solutions.

Here are some of the benefits that Best Buy expects to gain from the acquisition of Current Health:

• Increased reach: Best Buy will be able to reach a wider range of customers with its healthcare services through Current Health's network of hospitals and healthcare organizations.

• Improved efficiency: Current Health's technology can help Best Buy to improve the efficiency of its healthcare services by reducing the need for in-person visits.

• Increased revenue: Best Buy expects to generate additional revenue from the sale of its healthcare services and products.

The acquisition of Current Health is a strategic move by Best Buy to expand its healthcare business. The company believes that the growing demand for RPM will help it to grow its business and compete with other major retailers.

Best Buy Annual Report Detailing The Acquisition of Current Health Ltd

"On November 2, 2021, we acquired all of the outstanding shares of Current Health Ltd. (“Current Health”) for net cash consideration of $389 million. Current Health is a care-at-home technology platform that brings together remote patient monitoring, telehealth and patient engagement into a single solution for healthcare organizations.

The acquisition of Current Health is aligned with our focus in virtual care to enable people in their homes to connect seamlessly with their health care providers.

The acquisition was accounted for using the acquisition method of accounting for business combinations. The purchase price allocation for the assets acquired and liabilities assumed is substantially complete, but may be subject to changes as we complete our valuation analysis in fiscal 2023. The acquired assets included $351 million of goodwill that was assigned to our Best Buy Health reporting unit and was not deductible for income tax purposes.

Results of operations from the date of acquisition were included within our Domestic reportable segment and our Services revenue category. The acquisition of Current Health was not material to the results of our operations."

Source: Best Buy Annual Report

What does goodwill mean in M&A?

In mergers and acquisitions (M&A), goodwill is an intangible asset that represents the value of a company's brand, customer base, and other intangible assets. Goodwill is calculated as the difference between the purchase price of a company and the fair market value of its identifiable assets.

Goodwill is often created when a company is acquired for more than the value of its tangible assets. This can happen for a number of reasons, such as if the company has a strong brand, a loyal customer base, or a competitive advantage.

Goodwill is a valuable asset, but it can also be a risky one. If a company's brand or customer base declines, the value of goodwill can decrease. This can lead to a loss for the acquiring company.

Despite the risks, goodwill can be a valuable asset for companies that acquire other companies. It can help the acquiring company to grow its business and compete with its rivals.

Here are some of the benefits of goodwill in M&A:

• Increased brand awareness: Goodwill can help a company to increase its brand awareness and attract new customers.

• Improved customer loyalty: Goodwill can help a company to improve customer loyalty and reduce customer churn.

• Increased market share: Goodwill can help a company to increase its market share and compete with its rivals.

• Reduced costs: Goodwill can help a company to reduce costs by improving efficiency and reducing the need for marketing and advertising.

However, there are also some risks associated with goodwill in M&A:

• Depreciation: Goodwill is a depreciable asset, which means that its value will decrease over time.

• Impairment: Goodwill can be impaired if the value of the company's brand or customer base declines.

• Tax implications: Goodwill can have tax implications for the acquiring company.

Overall, goodwill can be a valuable asset for companies that acquire other companies. However, it is important to weigh the benefits and risks of goodwill before making an acquisition decision.

Summary of the Best Buy - Current Health acquisition

Best Buy acquired Current Health in October 2021 for $400 million. Current Health's revenue for the year ended December 31, 2020 was $20 million. The company's revenue has not been publicly disclosed since the acquisition.

Best Buy has said that it plans to use Current Health's technology to expand its healthcare offerings, including its Geek Squad remote patient monitoring service. The company has also said that it plans to use Current Health's data analytics capabilities to improve its own supply chain and operations.

It is too early to say how much revenue Current Health will generate for Best Buy in the long term. However, the acquisition is a significant step for Best Buy as it seeks to expand its healthcare business.

Revenue Multiple

The revenue multiple at which Best Buy acquired Current Health was 20x. This means that Best Buy paid 20 times Current Health's annual revenue of $20 million for the company.

A revenue multiple is a valuation metric that compares the price paid for a company to its annual revenue. A higher revenue multiple indicates that the company was acquired at a premium to its current revenue.

There are a number of factors that can contribute to a high revenue multiple, including the company's growth prospects, its market share, and its competitive advantage. In the case of Current Health, Best Buy may have paid a premium for the company's technology and its potential to grow in the healthcare market.

It is important to note that revenue multiples can vary depending on the industry and the specific circumstances of the acquisition. As a result, it is difficult to say whether Best Buy paid a fair price for Current Health without more information.

Here are some of the factors that can affect the revenue multiple of a company:

• Growth prospects: Companies with strong growth prospects are often acquired at a higher multiple than companies with slower growth. This is because investors are willing to pay more for a company that they believe will be able to generate more revenue in the future.

• Market share: Companies with a large market share are often acquired at a higher multiple than companies with a smaller market share. This is because investors believe that companies with a large market share are more likely to maintain their dominance in the market and continue to generate revenue.

• Competitive advantage: Companies with a competitive advantage, such as a proprietary technology or a strong brand, are often acquired at a higher multiple than companies without a competitive advantage. This is because investors believe that companies with a competitive advantage are more likely to be successful in the future and generate more revenue.

Overall, the revenue multiple at which Best Buy acquired Current Health was high. However, there are a number of factors that could have contributed to this, such as Current Health's technology, its growth prospects, and its market share.

It is important to note that revenue multiples can vary depending on the industry and the specific circumstances of the acquisition. As a result, it is difficult to say whether Best Buy paid a fair price for Current Health without more information.

Engage with the HealthTech Community

HealthTech M&A Newsletter from Nelson Advisors - Market Insights & Analysis for Founders & Investors. Subscribe today! https://lnkd.in/e5hTp_xb

HealthTech M&A Advisory by Founders for Founders, Owners & Investors. Buy Side, Sell Side, Growth and Strategy mandates - Email lloyd@nelsonadvisors.co.uk

HealthTech Thought Leadership from Nelson Advisors - Industry Insights & Analysis for Founders, Owners & Investors. Visit https://www.healthcare.digital