Which is the better con?
Momma Kliff used to say that if you have to keep explaining your actions then something isn’t right. Well judging by the how the folks at Livongo and Teladoc are acting something is rotten in Denmark. Each day since this $18.5 Billion merge was announced executives from both companies have been going to great lengths explaining why Teladoc paid $18.5 billion with added bonus of diluting existing Teladoc shareholders.
Now to be clear here strategically we understand the rationale behind the merger, there are synergies and very little overlap in the respective customer bases. That as we like to say is the good news. However as strategic this may be neither company can escape the fact that Teladoc is paying $18.5 Billion plus seriously diluting their existing shareholders. This isn’t just the pink elephant in the room it’s the rainbow-colored unicorn.
So far we have yet to see anyone ask Teladoc why Livongo and why $18.5 Billion. Nor have we seen anyone ask why not gain these synergies at a cheaper price. As we noted Teladoc could have easily acquired LifeScan for a fraction of the $18.5 Billion and with the free cash flow generated by LifeScan not have to dilute the existing Teladoc shareholders. These deal may not have completely paid for itself but it’s a hell of a lot better than what they did and LifeScan also comes with a huge installed user base.
The problem is in each of these interviews the person asking the questions has fallen into the digital health trap. They don’t ask hard questions because they see digital health as the answer. Like so many they have fallen in love with the toys in the toy chest and either have forgotten this is also a business or failed the one business class they took in college. Folks not to be Captain Obvious here but the goal in the end is to make money. Something that’s going to be very difficult to do when you’re vastly overpaying.
Heck even in these cupcake interviews no one from Livongo or Teladoc really knows what this new company will look like or how they plan to make money. All they can talk about is way cool whiz bang. Well whiz band way cool is nice, but a sound well thought out strategy is better.
Yet Livongo and Teladoc aren’t the only companies struggling to rationalize an acquisition, thanks to Ascensia they are not alone. We along with most of the diabetes community are still scratching our heads as to why Ascensia is paying $80 million for Senseonics. Listen not to be snarky but when Roche, a company that wasted over a billion bucks to acquire Disetronic and then wasted a another few hundred million on Medingo , walks away from a company you know that pigs aren’t just flying they are also doing summersaults.
The fact is Ascensia was so desperate to be in the CGM market they went after Senseonics. Senseonics may not be Coyote Ugly but we think Ascensia is about to make the dreaded walk of shame.
So who did the better con job here? Glen Tullman Livongo’s CEO or Tim Goodnow Senseonics CEO? Now some may say that coning $18.5 Billion from Teladoc makes this no contest. However Tim had a much more difficult con given Senseonics history and future outlook. Glen didn’t have to work as hard given that digital health is hotter than Georgia asphalt and Livongo on the outside looked great. Tim had some real selling to do while all Glen had to do was dazzle Teladoc with visions of greatness, how Teladoc with Livongo would lead the digital health revolution.
So kudos to both Glen and Tim as they did what every good CEO is supposed to do, enhance shareholder value. It may be a con but like all good con jobs the payoff was huge.