Sword Health buys Headspace in $200M to $300M deal

Sword Health, a digital therapeutics company that started in the physical therapy space, has acquired digital mental health company Headspace in a deal valued between $200 and $300 million. Healthcare Dealflow broke the news, citing a Massachusetts regulatory filing from July, and Axios was the first to report the financials, based on multiple anonymous sources.

Neither company has publicly announced or confirmed the deal, which is reportedly closing September 14th.

Sword Health will wholly acquire Headspace parent company Orange Dot and will apparently fold it into its current operations, at least in the short term. In the aforementioned regulatory filing, Headspace writes that "current service offerings, which include behavioral health coaching, virtual therapy, virtual psychiatry, and on-demand wellness content, will continue without interruption following the closing of the Proposed Transaction."

The exit is not a lucrative one for Headspace investors; the company was valued at $3 billion at the time of its merger with Ginger five years ago. Even a $300 million price tag is less money then Headspace alone had raised from investors -- $320 million, according to Crunchbase. 

The deal doesn't represent Sword Health's first foray into the mental health space. It has two AI-powered offerings, employer-based Mind, which was expanded into a full Employee Assistance Programme (EAP) in March, and Dawn, the company's first direct-to-consumer offering, which was rolled out in March. 

"The launch comes at a critical time, as 49% of AI users with mental health concerns currently turn to generic chatbots for support. However, unlike general-purpose AI, Dawn is powered by a proprietary foundational model built specifically for mental health. Trained on hundreds of thousands of hours of clinician data, Dawn combines evidence-based practices—like Cognitive Behavioural Therapy, Acceptance and Commitment Therapy, and Dialectical Behaviour Therapy—with real-time context to offer support that is proactive, actionable, and outcome-driven," the company wrote at the time.

It's likely that Headspace's suite of products, including its own AI companion offering Ebb, will be rolled into these two frameworks.

This isn't the first competitor Sword Health has snapped up this year -- in January it bought Kaia Health in a similarly-priced deal.