PERS Industry Reacts to Connect America’s Acquisition of Lifeline
Following up on this month’s industry-shaking news of Connect America acquiring Philips Lifeline, we’ve been flooded with comments and analysis about the deal.
Hear how some industry insiders reacted to one of the “biggest deals in PERS history.”
On the overall deal:
“I hear that this business sold for close to $400 million,” said industry insider and watchdog Laurie Orlov. “Philips didn't pay a lot of attention to anything. They’ve ignored this business for many years, and I imagine they would have tried to sell it sooner if the market was right for that.”
“I think this deal was really done for one, the brand. Two, for that extensive customer base that's in place. And three, for the possibilities to leverage that base with healthcare and other related solutions,” said Mike O’Neal, head of North American Business Development at Essence.
“Philips was eventually going to be on the block. So I don't think it was a big surprise that they were selling. There aren't that many big players who could have afforded to purchase Philips. So again, a little bit of a surprise with the Connect America versus, say, Best Buy, but not a shock to me at least,” said Mara Perlmutter, Founder & CEO of Trelawear.
On why it made sense for Connect America:
“What Connect America got were those Philips subscribers; that’s the positive news. So now they have a bigger subscriber base with recurring revenue from all those subscribers who stay with them,” said Orlov.
“The bad part is Phillips did no innovation in all those years other than its fall detection capability. So all they have are pendants and a medication dispensing device that looks like a gumball machine. But what they have that Connect America could use is trained reps who know how to talk to seniors on the phone,” she said.
Orlov continued, “It's a lot of hassle, and they get a lot of users, presumably, and that's what makes it worth it to Connect America. The bad news is they now have to deal with the integration of systems such as they were at Philips, and they have to deal with the [outdated PERS] devices.”
“I think this is a market share category. Clearly, they wanted the increase in users and potentially expand what they're able to sell their users. The more data they can collect, the more valuable they are as an entity. So I think this is a market share play versus other competitors,” said Perlmutter.
Perlmutter added, “One of the other big factors is the fact that they do exactly what Philips did. In terms of integration and in terms of the transition itself, they probably felt that they (Connect America) were the most competent in terms of an expedient transition.”
On why it made sense for Philips:
“Connect America has leadership which is up to the challenge. A lot of other people would not want to deal with the challenge of the existing upgrade requirements, not only in the hardware but also in the software. Connect America is big enough and capable enough and has a strong leadership team that could pull that off. Other companies would be much more challenged if they don't have that leadership capability,” said O’Neal.
“The unknowns, relative to what the upgrade requirements would be and what the cost of that is going to be, probably scared the living daylights out of people. Connect America has to deal with it anyway, but if you're let's say a Best Buy, that's a lot of work and a lot of risk,” O’Neal added.
On industry consolidation:
“I can say this acquisition is transformative for the PERS industry. I believe the industry will continue to experience consolidation,” said Christopher Brady of TRG Associates.
“I think it's a one-off because what it is is that Philips dumped a business, and they had to dump it to somebody,” said Orlov.
She added, “And there were, I imagined by the time they got this deal done, there were no other bidders. Nobody else wanted it. If it was such a good business, multiple companies might've bid on it, but there were no other businesses, and healthcare companies didn't bid on it. Consumer electronics companies didn't bid on it. It was a PERS company that bid on it.”
“I don't know if it's part of a trend. I think the PERS business and even the security business has to go through a reset,” said O’Neal.
“So in that reset, there will be companies that will struggle with making the adjustments. Those companies will have to find a home, but I don't think there's a conscious effort here to basically combine companies, get increased scale. I think what you're going to see more likely happen is if there's a big enough base of customers, and an aligned healthcare company can tap into that, they may acquire it for that base of customers. But in my judgment, that's very different than consolidation, quite frankly,” added O’Neal.
On private equity and outside investment in PERS:
“My view is that it is very positive from an investment and private equity standpoint as a catalyst for new deals and making this segment sexy,” said Santiago Sebastian de Erice, former Chief Sales & Marketing Officer for Libify.
On the healthcare channel versus direct-to-consumer channel:
“They're getting the healthcare partners that Philips had, and that was one of the things that Philips did cultivate over the years was relationships with medical practices. Connect America would be crazy to get rid of that those relationships, assuming that they do resolve their referrals,” said Orlov.
“I think they'll keep their base in place. Certainly, Connect America gives them significant scale. They have a software platform that can accommodate that. They're very good at managing those accounts. Adding more accounts, provided they do the upgrade, is a nice way to sustain their business as they make that shift,” said O’Neal.
He continued, “Additionally, those customers all provide the opportunity to be part of the shift. It's much more difficult to get a customer than to keep a customer. So the fact that they're going to have a significantly larger pool to convert to any of those healthcare solutions is a huge advantage for them.”
On the Philips Lifeline brand:
“I don't think they'd drop Lifeline. If I'm Connect America and I know that Philips Lifeline has significantly more equity than anything else they have, I would strongly think about using that brand. Certainly, that relationship with Philips will last for a while. Philips is a well-known company in the healthcare space and has a very good reputation,” said O’Neal.