Castlight Health, a company that helps employees select health benefits, has acquired Jiff, a technology-based wellness program. The combined company will serve more than 240 customers, including more than 70 of the Fortune 500, once the acquisition closes.

San Francisco-based Castlight will absorb Mountain View, Calif.-based Jiff, with the combined platform aiming to help employers make employee engagement more efficient, purchase and deploy a wide range of benefit technologies, and measure impact — “enabling [employers] to reap the benefits of lower healthcare costs and a healthier workforce,” according to Castlight.

Both companies have been focused on building a benefits platform for employers to manage health and benefits across their organizations, says John Doyle, Castlight’s president and COO. Once the acquisition closes, Doyle will become CEO of the company.

He adds that the acquisition is responding to the needs of employers, who are “overwhelmed” by the number of HR tech startups coming at them with wellness offerings, disease management, telehealth offerings and more.

“[Employers] are saying, ‘We can’t sort through all these options [or] manage all the relationships. We need companies to build … digital health [solutions, which] consolidate the ecosystem and gives us best-in-breed solutions with single vendor relationships,’” Doyle says.

Rhonda Marcucci, president of Gruppo Marcucci, a Chicago-based HR technology consulting firm recently acquired by Arthur J. Gallagher & Co., says that in the last 20 years, there has been a three-to-five year cycle for what employers are looking for. First, they want best-in-class solutions, but when those become too hard to manage, they look to one-stop services, and then back to best-in-class.

Henry Albrecht, CEO of Limeade, a Bellevue, Wash.-based technology-based wellness provider, says that it is clear the wellness market is consolidating in interesting ways and from different directions.

“We’ve seen acquisitions from health plans like United Health’s Optum with Rally; private equity firms like Insight Partners taking on Virgin Pulse and now healthcare transparency companies like Castlight Health nabbing Jiff,” he explains. “Right now, the corporate wellness technology market is heavy on stand-alone, transactional benefits solutions, and light on seamlessly connected, year-round well-being experiences that employees love and want to use.”

The combined company
The new Castlight aims to provide all-in-one services to employers.

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“Despite all of the changes in healthcare that have happened and will come, one thing is constant: employers continue to provide healthcare benefits. Moreover, they care deeply that their employees engage in their benefits so that the returns on this huge investment are felt by all,” says Dr. Giovanni Colella, M.D., co-founder and current CEO of Castlight. “This is a tremendous challenge, and we believe the combination of Castlight and Jiff is uniquely positioned to solve it.”

Castlight will issue approximately 27 million shares and options at the closing of the transaction to former Jiff equity holders, representing approximately 20% of the combined company on a fully-diluted basis. The issuance of up to an additional 4 million shares is contingent on the achievement of specific growth objectives for the Jiff business in 2017. The transaction is expected to close in the first half of 2017 following satisfaction of customary closing conditions, including approval from Castlight’s stockholders with respect to the issuance of Castlight shares in the transaction.

Following the closing of the transaction, Jiff’s current CEO, Derek Newell, will become president of the combined company and Colella will move to executive chairman of the board of directors.

Doyle says this is the first acquisition for Castlight, which went public in 2014, and has focused on its core business since that time. “As we saw the market evolving, we decided we needed to move quickly to broaden the portfolio,” he explains of the Jiff acquisition.

At this time, Doyle says that are not looking for any new acquisition targets in the near-term since once the deal closes, Castlight will offer the “most comprehensive health benefits platform in the market.”

Broker’s role
Marcucci says that all-in-one solutions, like the new Castlight product, make it both easier and harder for brokers to help their clients.

It is harder because brokers, who used to only have to track carriers, now have to track technology companies, too. “There is lots of money coming into this market that is creating new startups, which go to employers,” she explains. But the brokers don’t know who many of the companies are.”

It also helps brokers, as Marcucci says these tools are very important as employees shoulder more of the burden of healthcare costs.

However, “these tools are early stage and everyone is trying to figure out how to get that engagement thing going with employees, to get results,” she says, while not specifically talking about the new company.

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