Mindpath’s Potential Acquisition of Talkspace Fails to Materialize

Talkspace Inc. (Nasdaq: TALK) and Mindpath Health were reportedly in deal negotiations that are now defunct. 

As reported by Axios Pro, Mindpath Health, a Sacramento, California-based outpatient mental health clinic operator, approached the New York City-based virtual-only behavioral health provider with a takeover bid. No deal materialized.

A representative of Talkspace declined to comment on the matter in an email.

A spokesperson from Mindpath told Behavioral Health Business that they were not aware of any deal, and therefore “I don’t have anything to share on the topic.”

An attempt by Mindpath to acquire Talkspace is not inconceivable given how much the company relies on telehealth and the potential appeal of Talkspace as an acquisition target

Executives with Mindpath Health have previously told Behavioral Health Business that the company is focused on establishing a national outpatient mental health office footprint capable of “toggling” between in-person and telehealth visits. 

The company’s telehealth makes up between 80% and 90% of the company’s visits after reaching nearly 100% during the height of the pandemic.

Mindpath Health CEO Christopher Brengard told Behavioral Health Business that Mindpath planned to operate in at least 15 states and open between 60 and 75 de novos by the end of the year: “2022 will be a pretty big year for us.”

Sacramento-based Community Psychiatry — owned by the private equity firms Centerbridge Partners and Leonard Green & Partners — acquired Durham, North Carolina-based Mindpath Care Centers from the private equity firm New Harbor Capital in May 2021.

At the time of the deal, the combined company had over 70 locations across the U.S.

As of April 2022, Mindpath Health employed about 700 clinicians at over 100 locations in Arizona, California, Florida, North Carolina, Ohio, South Carolina and Texas.

An analyst note from Jefferies Research Services said that Talkspace could be a prime acquisition target for any number of potential buyers seeking to jump into the booming virtual behavioral health space.

“With [Talkspace] valued just above cash, we believe ample potential buyers could emerge on the M&A front, particularly PE buyers or a large diversified player looking to get into the behavioral health space,” the Jeffries note states. “Despite the operational challenges, the company operates in an attractive and growing market for behavioral health services.”

The Jeffries note also points out that most major virtual behavioral health companies are privately held, “which we think is ideal as the industry emerges from a boom in demand, but public markets are somewhat hostile towards unprofitable businesses.”

Talkspace is unprofitable.

In the first quarter of 2022, Talkspace grew revenue by 11% to $30.2 million, year-over-year, but saw its net loss deepen by about 60% to $20.4 million. The company posted a net loss of about $63 million in 2021.

Talkspace has had a rough fall following the meteoric rise of its profile as one of the many digital health care companies to make flashing financing moves during the pandemic.

The company went public via a special purpose acquisition company (SPAC) in June 2021. Its stock closed at $9.19 on the first day of trading. It now sits at about $1.46 as of the writing of this article.

The merger with Hudson Executive Investment Corp. valued Talksapce at $1.4 billion. Its market capitalization stands at about $230.4M.

In November, the company parted ways with its co-founders — CEO Oren Frank and Clinical Services Head Roni Frank — after its third-quarter financial result revealed that it was failing to reach growth projections and was having customer acquisition challenges. It pulled its long-term 2021 guidance. Talkspace is presently led by interim CEO and Board Chair Douglas Braunstein.

The company is also facing a lawsuit seeking class-action status over allegations that Talkspace misled investors during its IPO process.