Continuing its recent streak of big announcements, GN Hearing says it will acquire a controlling interest in Lively, a leading online hearing aid sales and digital marketing platform that allows consumers to purchase and receive hearing care from licensed hearing care professionals in the United States. GN has reportedly purchased a 91% ownership stake in the company for $94.8 million (DKK 625 million) on a cash and debt free basis. GN has close ties with Lively, having been its sole supplier of hearing aids since the online company’s founding in 2018.
GN Hearing is the parent company of ReSound, Beltone, and Audigy and the sister company of GN Audio which makes Jabra branded headsets and Panacast cameras. In early October, GN Audio purchased e-sports company SteelSeries for $1.24 billion.
“Today, only 1 in 5 people who could benefit from hearing improvement wears hearing aids,” said GN Hearing CEO Gitte Aabo in a press statement. “Hearing health is being elevated on the overall healthcare agenda. Lively and GN Hearing joining forces will, combined with our network of hearing care professionals, be an important part of bringing hearing health to a new level.”
Although few unit volume numbers exist for the online hearing aid market, it’s estimated that Lively accounts for about 4% of all online hearing aids dispensed in the United States, and its “blended distribution” competitors include WSA’s Hear.com, Sonova’s HearingPlanet, Lexie, UnitedHealthcare, and Audicus.
GN North America President Scott Davis told Hearing Review that about 2 in 3 consumers who contact Lively are looking for at least some element of professional care via an in-person office visit or have a more severe hearing loss that requires in-clinic care. He believes the value proposition of teleaudiology demonstrated by the pandemic, along with the upcoming new class of over-the-counter (OTC) hearing aids that will be available in late-2022, make Lively an attractive company with multiple synergies for both GN and its network of hearing care professionals.
Although still yet to turn a profit, Lively reportedly grew at a triple-digit rate in 2021, with sales of around $15 million and an operating loss of about $26 million, much of that due to debt service. As pointed out in a Denmark-based MEDWATCH article, GN is essentially buying an early-growth company that has a reputation for quality service, high upside potential, and that gives them better access to the consumer-guided or “blended care model” that may become even more popular upon the advent of OTC hearing aids. With an established network of independent dispensing professionals, it is anticipated that GN will be able to offer consumers a wide range of options relative to online and in-clinic hearing care.
“We are thrilled to join the GN family due to the company’s advanced tele-audiology solutions, pioneering spirit in connectivity and unique sound processing capabilities,” said Lively CEO and Co-founder Adam Karp in a press statement. “In addition to our premier online experience using licensed hearing care professionals virtually, together with GN Hearing’s network of Beltone and ReSound customers, we can develop new offerings for many more potential consumers who seek both an online experience and access to a clinic. Being part of GN will accelerate our growth and ability to achieve our vision to empower everyone to reach their full hearing potential.”
The Lively acquisition follows GN’s purchase in early October of SteelSeries, a global premium software-enabled gaming gear developer, from the Nordic private equity company Axcel for a total purchase price of $1.24 billion (DKK 8.0 billion) in cash. That acquisition provided GN Audio—the larger sister company of GN Hearing—with a strong position in the attractive upscale gaming gear market and expanded its position in the premium audio market in which it already has a prominent place with its Jabra headsets and recently introduced Jabra Panacast cameras.
As a joint effort between GN Audio and GN Hearing, the company also plans to launch its hybrid Jabra Enhance Plus wireless earbuds in early 2022 after a revamping of its R&D department in October. The new product is reportedly “a unique high-tech, all-in-one hearable for the many people who experience mild-to-moderate hearing loss but who are not yet ready for traditional all-day wear hearing aids and would prefer a lifestyle solution to help them hear conversation easier and better in select situations such as at social gatherings, in meetings or while enjoying media.”
According to GN’s press release, Lively was founded in New York City in 2018 by Karp, Elad Kolet and Nicole Cadoret and built on Redesign Health, a platform that powers innovation in healthcare. Pioneering a fully virtual hearing care journey, Lively is reportedly a customer-first, end-to-end audiology platform that makes it easier for users to buy advanced hearing technology with licensed professional care. The company has consistently delivered on high customer satisfaction with a Net Promoter Score above 60, while return rates have been significantly below comparable offerings in the market.
As one of the most integrated digital marketing platforms in hearing health, Lively has deep expertise in engaging with customers that are active on social media and are becoming more and more comfortable buying online. These customers are almost ten years younger than users seen in hearing care clinics. GN Hearing has been the sole supplier of hearing aids to Lively since the company launched providing the opportunity to closely follow the success of Lively and interact with the management team. GN Hearing and Lively share the ambition of bringing hearing health to even more people. Lively offers GN Hearing’s current hearing care professionals scale and a platform to operate, engage and compete online for these younger, more tech-savvy consumers who are looking for access to a physical clinic or seeking solutions for severe to profound hearing loss that cannot be served virtually.
Today’s online market is estimated to account for around 4% of the U.S. hearing care market. With the coming introduction of OTC devices and younger consumers seeking hearing solutions, the online segment is expected to grow at a much faster pace than other segments. Lively has executed strongly on its competitive advantages and has outgrown the market since inception. In 2021, Lively is expected to deliver revenue of around DKK 100 million and an EBITA of around DKK -170 million reflecting the early-stage growth profile of the company.
In February, Lively made news when its parent company, Redesign Health, lobbied unsuccessfully to expand telehealth and make direct-mail hearing aids available to adults in Florida.
GN’s Strategic Rationale
According to the press release from GN, with the increasing digitalization of the world, consumers demand online solutions and services also from the hearing industry. The online space has been growing for several years and has been accelerated by the pandemic. Further, the US OTC hearing aid regulation is expected to expand the market, in particular by driving earlier adoption for people with mild-to-moderate hearing loss and younger consumer segments.
GN Hearing says it has prepared for the emergence of a future. According to the company, GN Hearing’s strategy has centered on not owning retail locations that compete with its customers. The acquisition of Lively will directly benefit GN Hearing’s network of hearing care professionals by adding valuable capabilities to GN’s operations, including digital channel access, in-depth expertise of digital marketing and telehealth, and data-driven consumer behavior to attract new, younger consumers.
Following the transaction, GN Hearing has an ownership of 91%, while the remaining 9% is held by the current management team of Lively, with GN Hearing having an option to acquire the remaining 9% at pre-defined terms. The purchase price is $94.8 million (DKK 625 million) for the acquisition of Lively on a debt and cash free basis and the transaction is expected to close within a week when all relevant documents are in place. The transaction will be financed as 100% cash payment and GN’s long-term leverage target of 1-2x NIBD/EBITDA is confirmed.