How Livongo reached its historic $18.5 billion Teladoc merger

By the end of 2014, the startup renamed itself Livongo Health. In July 2019, Livongo went public with a listing on the Nasdaq. And just over a year later, in August 2020, it forged the biggest digital health deal ever with an $18.5 billion merger with Teladoc, which also provides telemedicine services but in a different niche of the market.

Livongo’s growth strategy has relied on a series of secret sauces, including an employee base that is largely made up of actual diabetes patients—including its own president, Jennifer Schneider.

Schneider told Fortune a personal story shortly after the company’s IPO about her use of Livongo’s platform, which had soared in popularity (and revenues) in the preceding years. She was touring the country to promote the public offering before waking up with low blood sugar, leaving her confused and woozy. That particular incident may have been a one-off in the midst of a hectic tour, but it can be a living reality for many diabetes patients.

With the firm’s technology, Schneider says she took her blood sugar readings, and the Livongo connected platform was then able to beam this information to a diabetes specialist who could give her immediate and personalized advice. (In this case, the advice was to raid the hotel minibar to get her glucose numbers back up.)

That convenience factor has only grown as interconnected technologies have become a regular part of our everyday lives, leading to shifting consumer attitudes in digital health care. For instance, Accenture finds that consumers are increasingly likely to choose health care service providers that can offer virtual offerings, such as the ability to use remote devices (such as Livongo’s) to keep track of their biometrics.

Those trends are borne out by Livongo’s revenues, which more than doubled to nearly $170 million, from $68 million, between 2018 and 2019, buoyed by high engagement rates.

Although Livongo has made rapid progress in the past few years, it took more than a decade—and a global crisis—to get to this point. “We as humans are kind of slow to behavior change,” Schneider tells Fortune.

Just as with everything else right now, the coronavirus pandemic put the process on overdrive.

“There was that big, big aha! moment with COVID. And I think that the market then said, ‘Oh, wow, this is not just a small piece of the puzzle. This is actually the future going forward,'” she says, referring to telemedicine’s staying power in American health care. As more patients were able to see their doctors virtually, they realized the benefits of the approach.

At the large New York Presbyterian health system, some 4% of outpatient visits were telehealth visits before the pandemic. That number has skyrocketed since, with somewhere between 85% and 95% of outpatient psychiatric visits being conducted online. Similar spikes have occurred for chronic disease maintenance.

This speaks to the synergies of, and the logic behind, the Livongo-Teladoc deal. Piper Sandler analysts paint the merger as a natural corporate marriage, particularly during pandemic times.

“Teladoc’s challenge has been utilization, which has improved considerably because of COVID,” they write in a research note. “Livongo helps solve for this because of their high engagement rates of 35%” and more.

On the flip side, Livongo’s health coaches for diabetes and hypertension and other chronic conditions can’t actually prescribe medication—a problem that Teladoc can solve by giving the company’s customers access to a bevy of doctors on the Teladoc network.

This particular merger may be the biggest of its kind to date. But don’t be surprised if you see a growing number of similar deals as telehealth leaves a lasting footprint on American health care.