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Zimmer Biomet’s Realized Synergies, Market Position after Integration

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Aug. 12 2016, Published 5:38 p.m. ET

Overview

Zimmer Holdings acquired Biomet in June 2015 and formed Zimmer Biomet Holdings (ZBH). The acquisition established the combined company as the second-largest player in the orthopedics medical device market segment. The company fully completed the Biomet integration in 2Q16.

The two companies’ highly complementary products and services have helped expand Zimmer Biomet Holdings. This led to efficient integration that helped achieve synergy benefits in the previous year and is expected to yield significant synergies over the next few years.

The cross-selling opportunities that resulted from the merger have been key drivers of growth for the company over the previous year. The iShares Russell Mid-Cap ETF (IWR) holds ~0.39% of its total holdings in Zimmer Biomet.

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Integration synergies and company’s recent performance

Zimmer Biomet Holdings expects EBIT synergies of $225 million to be realized by the end of fiscal 2016, which is on track according to the company’s performance results to date. The company expects to deliver EBIT synergies resulting from the merger to be fully realized by the end of the third year of the deal.

Zimmer Biomet completed its commercial integration in 1Q16, which helped the company expand its geographic reach and gain a greater market share by capturing more business opportunities. The company’s pro forma growth improved in the recent quarter and is expected to continue gaining momentum amid more comprehensive and expansive product offering and strong commercial expertise.

However, amid the company’s focus on its integration initiatives, its competitors such as Stryker (SYK), Smith and Nephew (SNN), and Depuy Synthes—which is a subsidiary of Johnson & Johnson (JNJ)— managed to gain some of the market share. Zimmer Biomet, however, is now focused on regaining the lost market share through its stronger market position and higher range of market offerings.

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