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Smith & Nephew and Plus Orthopedics: A Deal Drawn to Scale

Executive Summary

Smith & Nephew announced that it will buy privately-held Swiss company Plus Orthopedics. The acquisition gives Smith & Nephew a 12% global market share in the total reconstruction market, bumping it up to the global number-four position. S&N officials say the deal is about scale; the combination offers manufacturing leverage, including improved capacity utilization and improvements in the costs of goods. The merged companies also expect to leverage combined sales and marketing capabilities and look for an increase in sales resulting from putting S&N products through Plus sales channels-and vice versa. Some analysts have insisted that the Plus deal is about scale--but they're referring to the bulk that's required for Smith & Nephew to remain independent. S&N has been rumored to be a takeover candidate itself, in an industry in which the number of major players has been steadily shrinking due to consolidation.
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