While the headline figure of a A$1.6 billion sale price for Eucalyptus was a cause for celebration, seen by many an important payday for an Australian startup sector where liquidity is an issue, the fine print of the deal shows there’s a long way to go before the cash trickles down to investors and shareholding employees.
The online healthcare startup, founded in 2019, had been looking to raise new funding at a valuation that would have minted it as a unicorn when the US$1.15 billion deal with NYSE-listed rival Hims and Hers dropped.
The acquisition price is around 10x of the US$111 million in venvture funding the startup raised over four years. Eucalyptus last raised $50m at a $520m valuation in April 2023.
It’s a bold marriage by both sides, banking that the whole will be greater than the sum of their rival parts.
Shares in San Francisco-based Hims & Hers Health have tanked 64% over the last year, including a 55%+ slide in the first two months of 2026 – an 8% fall in the days since the deal was announced.
The health and wellness platform is no Robinson Crusoe in falling out of favour with investors – Nasdaq-listed workplace software firm Atlassian’s shares have plunged more than 70% in 12 months and more than 50% in 2026 as software companies in general struggle amid the AI transformation.
But Hims & Hers, founded in late 2017, before listing on the NYSE in January 2021 via a special purpose acquisition company (SPAC), is not a software company per se. Like Eucalyptus, it sells online consultations and treatments for health issues such as weight loss, sexual dysfunction, hair loss, skincare and mental health.
Legal and regulatory troubles
Part of the problem is a bitter battle with Novo Nordisk, manufacturer of GLP-1 weight loss drugs Ozempic and Wegovy.
Hims & Hers signed a deal with the Danish drugmaker in April 2025 to sell Wegovy. It lasted about three months before Novo Nordisk ripped it up, claiming their customer was selling Wegovy copies illegally, as well as objecting to the marketing tactics of the US startup.
The dispute escalated last month when Novo Nordisk launched US legal action, suing Hims & Hers for damages over selling compounded versions of its drugs, claiming they infringe on the Danish company’s patents, as well as asking the court to ban their sale.
It’s a pincer movement, since the US Drug and Food Administration is also gunning for Hims & Hers over its marketing and compounded drugs, announcing its own investigation and crackdown a few weeks ago.
Incidentally, Eucalyptus has some inkling of what’s going down having pursued a similar path a few years back before compounding weight loss drugs were banned by the federal government in early 2024, amid objections from the startup.
Meanwhile, Hims & Hers (NYSE: HIMS) shares now sit around US$14.50, down from a 12-month high of $70.43, for a market cap just above US$3.3 billion.
That means Eucalyptus is now worth around a third of acquirer’s current market cap.
But none of this battle – an existential threat to Hims & Hers – prevented breathy reporting by some news sites of how 100 employees in the Eucalyptus ESOP will be millionaires, while VCs “stand to make a motza”, especially Blackbird’s 2018 fund delivering a 34.5x return “once paid out”.
That’s an important qualifier in the reporting, because there are plenty of devils in the details of this M&A deal.
High bars to clear
A lot of work to be done by the Eucalyptus team to achieve the total acquisition price.
Blackbird owns around a quarter of Sydney startup, having invested seven times. So theoretically, they’re sitting on something circa a A$400m return.
Partner Nick Crocker told Capital Brief that: “the transaction will see more than 2x our entire 2018 fund returned over the coming years”.
But the A$1.6bn headline figure is still a long way from the reality for many shareholders. Patience is also required, since it will be FY2029 before the total acquisition price is finalised.
First up, if and when it goes through in mid-2026 – Eucalyptus operates in several regions across Europe, Asia and North America, so the deal is likely subject to multi-jurisdictional regulatory clearances – Hims & Hers is making an initial 40% downpayment in cash: US$240m (c. A$340m), split between staff and investors, the former getting a little over half that figure, US$133m.
Another US$710m is paid out to non-staff, post-close, over 18 months.
Only key employee sellers score the 40% of their entitlement upfront – the remaining 60% is based on earnouts, worth up to US$200m, and tied to revenue/EBITDA targets over three years, spanning 2026-28.
That means employees are in golden handcuffs until then if they want the upside. There’s US$50m in HIMS shares on the table under the company’s 2020 Equity Incentive Plan – $12.5m a year over 4 years – “to certain employees” who join the US company from Eucalyptus.
Yes it’s a smart retention mechanism to keep key staff to help ensure the ongoing success of Eucalyptus, but walk away before then and those employees likely forfeit a large slice of their payout.
What investors get
Investors initially score around 18 cents in the $1 – 20% of 90% of their entitlement upfront when the deal closes. Then they’re paid the remaining 70% six times, every three months, over the next 18 months.
So by around the end of 2027, investors in funds such as Blackbird, Airtree, Woolworths VC fund W23, OneVentures, Athletic Ventures, and Mary Meeker’s BOND Capital should have a pretty clear idea of how they’ve done, including the final 10% of investor returns tied to the performance targets.
On top of all that, then the US$1.15 billion sale price is also subject to net debt and working capital adjustments.
Its last filed accounts, in FY2024, Eucalyptus had revenue of $120.9 million, an increase of $41m on the previous year, while cutting its after-tax losses by more than half to $15.2m.
Given the business was still most likely running at a loss and burning cash – hence raise plans ( it was rumoured to have secured $190m in VC funding at a A$1.37bn valuation last November) – the adjustments could also reduce the deal size.
It gets better, because Hims & Hers has, at “its sole discretion”, is able pay up to 60% of deferred and earnout payments in HIMS stock rather than cash. The price will be set by a VWAP at time of issuance, not when the deal was cut in mid February, so if things go badly in the courts and HIMS stock drops further between now and payment, Eucalyptus stockholders are shortchanged on the deal, while also being exposed to HIMS equity risk without a hedge.
M&A is a tricky win
To understand the risk here, you need to look at the data around M&A deals. More than half (50–70%) are considered failures in terms of metrics such as shareholder value, post-merger performance and cost synergies (advising on one is lucrative, however, for the consultants involved).
Reviews by Harvard Business Review and others concluded that around 30–50% of M&A deals create value for the acquiring company’s shareholders, while typically, many see the share price fall. A majority of acquirers overpay and underdeliver on synergies (hello to the Ellisons, owners of Paramount, and congrats on the Warner Bros deal).
Yes, a majority of shareholders in the company being acquired score a premium, but if it’s being paid in the acquirer’s stock, then its a challenge to win when you’re on both sides of the trade.
Just a quick reminder of how tough mergers can be.
In 2021, Just Eat Takeaway (JET) – the UK company that shut down Menulog in Australia last year – bought US rival Grubhub for US$7.3 billion. Less than four years later, in late 2024, JET offloaded the business for US$650m – a $6.5bn loss. JET itself was taken over for US$4.2bn 12 months ago.
And Australian startup Sendle, which merged with two similar US delivery businesses in mid-2025, is now in liquidation, having ceased trading in January as the post-merger.
And who can forget Rupert Murdoch buying MySpace 20 years ago for US$580 million, then selling it for $35m.
Of course, everyone has fingers crossed that the Eucalyptus deal is a roaring success and a shot in the arm for Australian startups and investors having been pining for amid a lack of liquidity events as multiple VC funds reach the end of their 10-year lifespans.
But first up, it’s all hands in founder mode for the Eucalyptus team to earn what they’ve worked the past seven years for.
