HealthEquity Snaps Up Further For $500 million

Technology-enabled services platforms provider HealthEquity has agreed to acquire Further for a consideration of $500 million. The latter provides health savings account (HSA) and consumer direct benefit administration services.

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HealthEquity (HQY) President and CEO, Jon Kessler said, “By putting HealthEquity’s Total Solution inside of network partner applications and private-label brand environments, Further’s technology will align us more closely than ever before and enable new partnerships to introduce more consumers to HSAs.”

This acquisition helps HealthEquity expand its leadership in the HSA market and enhance its ability to achieve higher growth with health plans and other go-to-market partners. (See HealthEquity stock analysis on TipRanks)

Further has about 550 thousand HSA customers and $1.7 billion HSA assets under custody. This increases HealthEquity’s HSA members to 6.3 million and HSA assets to more than $16 billion.

HealthEquity estimates this acquisition to add about $60 million in annual revenue and 20% contribution to adjusted EBITDA margin. It also sees additional annual efficiencies of $15 million within three years, with $55 million in one-time expenses incurred over the same period. The transaction is expected to close by September.

On April 5, Leerink Partners analyst Stephanie Davis reiterated a Hold rating on the stock with a $80 price target (18.4% upside potential).

Davis commented, “HQY remains a dominant HSA/CDB player, benefitting from employers’ growing preference for one stop shops for employee directed benefits.”

Overall, consensus among analysts is that HealthEquity is a Moderate Buy based on 5 Buys and 2 Holds. The average analyst price target of $87.43 implies upside potential of 29.4%. Shares have gained about 32.8% over the past year.