Digital health providers in tie-up to serve consumers in pandemic with Skadden’s counsel

The blockbuster $18.5 billion merger between Livongo Health Inc. and Teladoc Health Inc. was a deal born of Covid-19 and the unprecedented growth that swept the digital health sector during the pandemic.

The challenge for Skadden Arps M&A partners Ringler and Nijjar was to shepherd their client, Livongo, through the process amid the dizzying volatility of the marketplace during the summer of 2020. The goal was to create a company that could serve a spectrum of health needs using virtual care. The catch was that the complex, high-dollar deal that would unite digital companies had itself to be accomplished online even as the counterparties' market values gyrated wildly.

"This was driven by consumer demand for digital health access that was completely unforeseen a year earlier," Nijjar said.

"The merger was driven by Covid," added Ringler. "Telehealth was a thing, but with spotty public recognition. Suddenly it became an attractive alternative. There was huge, explosive growth in both companies' stock."

At the outset of discussions in June, Livongo was a $7 billion company. Two months later, as virtual healthcare became part of the solution to pandemic isolation, its valuation had more than doubled.

Livongo, based in Mountain View, was a stand-alone outfit providing data science and technology-enabled platforms for managing chronic diseases like diabetes and hypertension. Teladoc, of Purchase, N.Y., was the largest publicly traded telemedicine organization. Combining them amounted to "the Netscape moment for digital health," one venture capitalist said. The united companies, now operating as Teladoc, won a Forbes Healthcare Award for outstanding firm.

To manage the dealmaking and make the final product work, merger leads Nijjar and Ringler drew on assistance from Skadden partners Karen L. Corman, labor and employment; K. Kristine Dunn, banking; P. Michelle Gasaway, capital markets; Nathan W. Giesselman, tax; Ken D. Kumayama, intellectual property; Joseph M. Yaffe, executive compensation and benefits; and Maria A. Raptis, antitrust.

"This was a stock transaction with a little cash involved," Ringler said. Given the market's unpredictability and the significant stock consideration at stake, he and Nijjar had to advise the Livongo board on an array of possibilities and scenarios as the companies' valuations ticked up by the hour--while simultaneously structuring terms that allowed the parties sufficient flexibility in case market conditions dramatically changed during the dealmaking. "The bankers had to run new financial analyses every day. And we knew that the stocks would continue to shift between the time the deal was announced and the time when it closed."

Added Nijjar: "Normally when you need to get a deal done quickly, you get everyone in a room to finalize the terms. In this case, where the deal needed to move along at warp speed, the only option was to get everyone in a virtual room. It was a fascinating situation--hammering out a deal for virtual health care companies, and doing the entire deal virtually."

Nijjar is a longtime Skadden M&A and corporate partner who joined the firm in 2007 right out of Columbia Law School. Ringler arrived at Skadden in 2019 after 22 years at Wilson Sonsini Goodrich & Rosati PC. He said, "It is certainly always energizing to handle deals that present novel challenges. The speed at which this transaction needed to come together, and the roller coaster valuations seen by both companies, meant we had to be exceedingly nimble in providing guidance to the board, continuously balancing near-term transaction pricing and the interests of the combined company in which Livongo shareholders would hold a meaningful stake."

Nijjar said, "The significance of this industry-leading deal should not be measured simply by dollar amount: although it is notable that this deal was the largest in the sector by approximately $16 billion more than the reported second highest-deal, what was incredibly rewarding was knowing that the resulting combined company was going to be a game-changer for the industry."

-- John Roemer