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CVS: Signify Health Deal Offers Unique Customer Acquisition Tool as Competition Intensifies

RJ Hottovy
Sep 9, 2022
CVS: Signify Health Deal Offers Unique Customer Acquisition Tool as Competition Intensifies

Key CVS Metrics

In yet another reminder that 2022 is shaping up to be a year of transformation for healthcare retail, CVS Health announced a $8B acquisition of at-home health provider Signify Health this week. Signify will give CVS access to a network of more than 10,000 clinicians (including physicians, nurse practitioners and physician assistants) across the U.S. that specialize in home-based visits to identify a patient’s clinical and social needs, and then connect them to appropriate follow-up care and community-based resources. CVS CFO Shawn Guertin described the acquisition as “an anchor asset” that would help the drugstore giant reach more patients.

In our view, this announcement is both an offensive and defensive move, intended to be a key customer acquisition tool as the company shrinks its traditional store footprint and prioritizes more healthcare focused models and an unique asset that other retailers focused on healthcare don’t have. (Recall that Walgreens is partnering with VillageMD to open 1,200 primary care locations by the end of 2027 and Amazon that acquired One Medical (a membership-based chain of primary care locations) for $3.9 billion in July).  This move also represents the most significant move by a retailer to offer at-home services since Best Buy’s acquisition of Current Health last year (and we wrote about here).

At its core, we believe there are two motivations behind this move: (1) increase the number of new CVS customers; and (2) drive greater engagement and visit frequency with existing customers. Despite closing 200 stores this year as part of its three-year plan to close 900 locations, we’ve seen visits per location trend ahead of pre-pandemic levels (even after experiencing YoY declines amid last year’s vaccine push). As more retailers enter the healthcare area, customer acquisition will become increasingly important, and Signify Health’s at home platform offers a source of differentiation.

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RJ Hottovy

Head of Analytical Research, Placer.ai

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for nearly 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank.

R.J. also brings a wealth of experience with early-stage investments as an investment committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he has advised over 50 foodservice and foodservice tech companies on more than $200 million in early-stage capital raises and M&A transactions.

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