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Plus Orthopedics: The Story Behind the Deal

Executive Summary

Even by the standards of today's medical device world, the acquisition last year of Plus Orthopedics Holdings by Smith & Nephew was impressive. Perhaps it was the deal's value: by any measure, one billion Swiss francs (or just under $900 million) simply has a nice ring to it. Perhaps it was the deal's European provenance: rarely in Europe do small start-ups grow to a size to justify such a valuation. But if the deal was anything but typical, the story behind Plus seems almost textbook.

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

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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