DarioHealth acquires Twill, a mental health app maker, for $10 million cash and 10 million shares, aiming to boost revenue and hasten profitability. Amidst a decline in venture funding, mergers and acquisitions are expected to increase in the digital health sector. The move aligns with market demands for fewer vendors managing broader health conditions, addressing solution fatigue and reducing management costs.
DarioHealth has acquired Twill, a digital health firm specializing in mental health apps, for $10 million in cash and approximately 10 million shares of common stock. The acquisition, announced on Wednesday, is expected to bolster Dario’s revenue and expedite its path to profitability, according to company executives.
The move comes amidst predictions of increased merger and acquisition activity within the digital health sector this year, fueled by a decline in venture funding and growing customer fatigue with managing multiple vendors. In 2021, over $29 billion was invested in digital health startups following the COVID-19 pandemic, with several companies going public. However, funding decreased notably last year, with no digital health IPOs occurring.
Experts suggest that consolidation could be a strategic move for startups facing challenges in raising capital within a more constrained funding environment. Acquirers may also view such opportunities as a means to enrich their product portfolios with cost-effective assets.
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Teladoc Health, currently undergoing its own cost-cutting operational review, indicated plans to allocate funds towards mergers and acquisitions during an earnings call this week, aiming to enhance its service offerings.
Consolidation is likely to be well-received by buyers of digital health products, such as health plans and employers, who are overwhelmed by a plethora of tools targeting a limited range of health conditions. This sentiment was echoed by Rick Anderson, Dario’s president, who highlighted the market’s demand for fewer vendors catering to a wider array of conditions to alleviate solution fatigue and reduce management costs.
The acquisition of Twill is expected to nearly double Dario’s pro forma revenue for 2023, the company noted in a press release. Despite reporting a nearly 20% decrease in revenue for the nine months ended Sept. 30, Dario aims to strengthen its financial position with the Twill acquisition.
In conjunction with the Twill acquisition, Dario also disclosed a $22.4 million private stock placement.