Buying the customer base – Facebook seizes WhatsApp, Brookdale acquires Emeritus

Facebook spends on WhatsApp -- Brookdale buys Emeritus.  It’s been an interesting week. Most people do not see a parallel in these two acquisitions, I’m quite sure, since the target user of each is separated by, oh, say 50 years. So what does it mean to consumers that Brookdale, in a 2.8 billion stock deal, will now be the first national and largest owner-operator senior living company in the United States -- with more than 1100 locations in 46 states? What does it mean that Facebook, that completely-closed purveyor of ads, pictures and Likes, spent $16-19 billion, just about the largest tech acquisition price EVER, on a messaging tool with no ads, no games, and no gimmicks that costs virtually nothing to use – other than a smart phone’s data plan? But it’s big overseas in places where Facebook isn't – and best of all, it requires your phone number to use -- which Facebook will now have if it didn't already.

No physical assets -- versus almost entirely physical assets. Both deals are about acquiring customer reach.The senior housing industry is watching its occupancy inch slowly towards 90% -- and is once again described as a very attractive investment category (see another 'largest ever' transaction from 2012). The announcement highlighted that the new Brookdale-Emeritus will be within a few miles of 80 percent of the aged 80+ population in the US – a true senior living Walmart effect. By last year, the average age of those billion-plus Facebook users had climbed to 41 – a decade older than Mr. Mark Zuckerberg himself! But the the younger folk are wandering away – so in 2012 Facebook bought one of their destinations, Instagram, for $1 billion. Meanwhile, the average age of resident in assisted living rose to 89 in that same year -- heightening dementia care and frailty as critical service needs.

In both cases, how do shareholders and users make out?  Some Emeritus shareholders believe that they may not have seen the 'best of the best' deals – one investment firm complained publicly the next day. And for Facebook shareholders – the WhatsApp deal might not have been too attractive either, since apparently Mark can do what he wants and barely has to consult them.  And the counting game goes on -- how many users does Facebook really haveis it really more than 1 billion – well, kinda, sorta. Users are aging, for sure, and sometimes they even die (30 million or so) – although Facebook no longer allows your profile to exit unless you have the right setting. If people look at your profile after your death – and like it,  is that account, uh, active? Will there someday be more Facebook profiles of the dead than the living (no kidding, that has actually been calculated).

Netting it out – consumer choice dwindles – and yet signals opportunity for others.  With these kind of expenditures, Facebook cannot, ultimately, acquire every single inventive people-connecting tool out there, at least not all at once. That means opportunity for others to innovate – especially when the barrier to entry appears to be a dorm room and a computer-like device. The Brookdale-Emeritus deal raises questions about service and quality – even if all assisted living is local, it's management that drives standards and expectations – especially for dementia care, given today's resident age. Brookdale has a VP for dementia care, Emeritus has a page about it – and some unfortunate fame. Was Emeritus weakened by its fame, making it a better acquisition target?  Were Brookdale’s board members and financial advisors emboldened to move forward?  This looks like a new opportunity for a national organization to standardize practices, set the industry example, deploy technology, and improve resident care across all its locations. Let’s see it happen.

Excellent article

Laurie, an excellent, thought provoking article (as usual).

I hope Brookdale does not go the same way as the UK's once largest care provider (Southern Cross). The business model of this company became one of financial engineering rather than providing care. Mainly triggered by the recession, but also because of inherent flaws in its structure, it crashed and burnt in spectacular fashion. Facebook certainly does give the impression of another company that is attempting to pump money into retaining a business model that continually morphs into something else - requiring yet more investment. Interesting times.

From LinkedIn LeadingAge - Wendy Jane Carrel

Hi Laurie, I appreciated reading your intelligent and interesting article comparing the recent Brookdale and Facebook acquisitions. Also liked reading the questions you posed. Thank you!!
 

 

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