On Monday evening, February 1, 2010, TSB received a phone call from one of our industry sources stating that there was some grumbling at Biomet that the Big Z was looking at this company as a potential acquisition. Anything is possible when you look at the current state of our industry. Let's be practical, how many of the start-up or early-growth stage companies are viable acquisition options? Most of them have "me-too" products and in all likelihood are sustained by surgeon investor or consultant revenues. This business model is frowned upon by many investors. Usually, the first question that is asked by an investor is "what percentage of your revenue comes from investor or consulting surgeons?" In addition, if these companies had IP equating to emerging or "breakthrough" technologies, the investors would have welcomed them with open arms long ago. The reason many of these "me too" companies are undercapitalized is because of a crowded marketplace, questionable technology at best, ego's that Freud would have studied with amazement, in addition to mediocre or terrible management teams.
The legacy companies within our industry are not looking for a minimum increase in market share when evaluating a potential acquisition. They are seeking an established product portfolio that will further strengthen their position in hips, knees, trauma and spine, at least the companies that tout themselves as offering the option of "one-stop" shopping. So where does that leave Zimmer?
Zimmer Spine leaves much to the imagination in terms of a product portfolio. Spine Tech and Spinal Concepts still has not placed them on the same ground that their legacy company breathrens stand on. Our guess is that at best the Big Z is sniffing around or window shopping at best. TSB wants to know if anyone has heard otherwise?
Biomet has similar product categories (joints, spine, dental). Makes more sense if focus is on total joints. If ZMH wanted to expand outside of that with some level of impact beyond an Abbott Spine-like acquisition, they'd have to look elsewhere (Synthes? S&N?) in my opinion.
ReplyDeleteReally like the blog. Keep it up!
I too would have to agree that at first glance it does not make sense. Both companies are major joint players, both have average spine and trauma groups, and both have dental or craniomaxillofacial divisions. Unless Biomet is hiding some fantastic future technology I don't see the upside. A better trauma company like Synthes with top-flight spine would be a nice fit but a cultural nightmare of the two. If a cutting edge biologics offering was available I could see this being a nice fit across all divisions.
ReplyDeleteAs anonymous notes, great blog - keep up the good work.
Synthes? What makes you think that that would ever happen?
ReplyDeleteDon't know that either of us are saying it will. Just saying from a product portfolio/market presence standpoint, Synthes appears to make a little more sense than Biomet. From a cultural standpoint, at least from what I've heard not having worked for Synthes, I think there'd be some hurdles. But who wouldn't want 3/4 of the trauma market if they could get it?
ReplyDeleteAfter a 15% Q4 loss Zimmer Spine certainly can't continue with the way things are! Zero leadership and zero new technology on the horizon. Will ZS make it in this segment? Thoughts? Great blog
ReplyDeleteLet's face it, Zimmer has no idea about what they're doing with spine. First they acquired Spine Tech and had Schlotterback running the acquisition. Terry is a great guy but he wasn't a spine guy. Everyone hailed Elliott a genius. Then there was a major exodus of all the people that came with that acquisition. Zimmer then acquired Abbott Spine formerly known as Spinal Concepts. Where has that gotten them? Dvorak is a bright guy but to claim that he was the principal architect of Zimmer's acquisition and integration of CenterPulse doesn't say much about his judgement. Zimmer is a recon company. It never performed well in trauma witness by some of the absurd acquisitions that they transacted in the late 90's. The biggest drawback is that anyone with talent is not interested in working in the frigid tundra of Minneapolis and Warsaw.
ReplyDeleteMM, here here. That is always my first question to a recruiter - Is it in Indiana? Northern Michigan? Minnesota? No thanks personally and more power to those who will.
ReplyDeleteWhat is it about Warsaw, IN that has made it so attractive to so many ortho device companies???
ReplyDeleteThink about it, many years ago it was farmland. The most popular person to come out of Warsaw was Rick Fox of the Los Angeles Lakers. Cheap real estate, Cheap taxes, Zimmer, Biomet, DePuy Recon and Trauma, Everything about these companies is cheap. The hottest place in town was the Bob Evans and the Volley Ball Bar. Let's keep it real, its a bastion of culture and style.
ReplyDeleteMM, Love your blog. This is a great source of information and candid conversation sprinkled in with some humor, which we could all use more of. As far as Minnesota and Indiana goes, I agree it's bizarre how these outposts have become the hotbed of medical device companies. Perhaps it's the clear fresh air that allows great creativity and ingenuity to pop into one's head while snowmobiling or fishing for the great muskellunge and walleye. Or it's the fact that there's nothing else to do so one stays at the office 'til the wee hours every night.......
ReplyDeleteHave heard about ZS looking at smaller companies with innovative products....same song....different verse?
ReplyDeleteLife is like a wheel, J. Binder actual Biomet CEO is former Spinal concepts one.
ReplyDeleteI agree that Zimmer Spine is "lost". Distributors cite, "no leadership, poor communication, can't adequately integrate an acquisition, and can't execute".
ReplyDeleteI see that Pioneer is opening an office in Austin, TX. Finally, someone who gets it. Unfortunately we all know that it will be a long time coming before any of the Warsaw '3'decides to open an office in such a locale
ReplyDeleteI'd be surprised if Zimmer would be allowed to acquire Biomet et al as it would have to pass regulatory hurdles (federal trade authorities review from a monopoly perspective), although an acquisition of a Biomet division might be plausible.
ReplyDeleteThere's something emanating from the spores in the corn field in Warsaw. Honestly, Warsaw, Poland has more going for it than Warsaw, Indiana
ReplyDeleteWarsaw, Indiana is a nightmare place to live - akin to something out of the Twilight Zone. You know you're in trouble when the prospect of leaving town for the day to go shopping at the mall in Fort Wayne is exciting.
ReplyDeleteThere's nothing like broad generalization to add good flavor an otherwise logical discussion. There may be many Minnesotans that fish and snowmobile a lot but I don't know that that's the reason it's become a center of medical device development. Most of it stems from the combination of Medtronic and the University and the fact that there are a lot of smart people there that actually like winter, most of the time, and would rather deal with winter and decent summers than the ludicrous cost of living in SoCal, the wasteland of NE Indiana, or the nearly mandatory pools in the yard for the 90+ degree Texas summers. It's all in the eye of the beholder. Few places are going to be ideal for all.
ReplyDeleteThe fact that so many people will move to Warsaw does boggle the mind, however.
Pioneer insists that it will only house its marketing department in its Austin location. Does that make sense? Shouldn't marketing be near the engineers and the engineers near production, vs. across the country from one another? Your thoughts please. Seems odd to me.
ReplyDeleteWhy would you want to have two separate facilities? In the long run TSB envisions Pioneer under one roof in Austin. There is nothing appealing about Marquette, Michigan unless you like long winters and cold weather. Let's get serious the move is inevitable from an operational and financial reality. Imagine how hard it is to recruit, what is appealing about living in the cold?
ReplyDeleteThanks for your input on Pioneer...my thoughts as well. It is unfortunate for the Marquette, MI community, where the unemployment rate is currently 11.2%. I wonder how long until they can make a complete transition considering they will probably not pay to move many existing employees. I am from Marquette and am concerned for many people I know who work there.
ReplyDeleteTSB can understand the angst that anyone is confronted with whenever an organization that one works for begins to initiate major change. If Pioneer was the size of a Stryker, the potential of reimbursing the employee for relocation cost would exist. Unfortunately, a company the size of Pioneer may not have the financial wherewithal contingent on the number of engineers in R&D. Much of it will depend on how much the Management Team values its R&D team.
ReplyDeleteOne has to wonder how much more can the people of Michigan endure, considering the massive unemployment and industry related devastation. It makes you wonder how much does management think through their strategy. I hope that you are not one of those people. Good Luck!
Why Z, D & B in Warsaw? Simple history is:
ReplyDelete1. Revra DePuy opens shop in Warsaw in 1895 selling splints; Jason Zimmer joins in sales.
2. Jason gets entrepreneurial and starts his own in 1920's, I believe...
3. Fast-Forward to the 1970's...Dane Miller & a few Zimmer engineering buds catch the same bug and voila'..."Orthopaedic Capital of the World" or something akin to that...