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Delving into Zimmer Biomet’s Acquisition of CD Diagnostics

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Deal overview

On August 15, 2016, Zimmer Biomet Holdings (ZBH) announced the acquisition of CD Diagnostics. The acquisition is a strategic deal undertaken to accelerate its strategy to acquire niche businesses to strengthen its musculoskeletal portfolio. After the acquisition, CD Diagnostics will help advance the company’s diagnostics offering.

Zimmer Biomet and CD Diagnostics have been partners since 2012. Zimmer Biomet has been successfully marketing CD Diagnostics’ synovasure periprosthetic joint infection (or PJI) test in recent years. The graph above shows Zimmer Biomet’s revenue trend over the recent quarters.

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Strategic benefits and opportunities of the deal

CD Diagnostics is a company specializing in the development of immunoassays and biomarker testing. The acquisition was expected to strengthen Zimmer Biomet’s signature solutions offerings launched by the company in 2Q16.

Dan Williamson, group president of Zimmer Biomet’s joint reconstruction business, said, “We’re excited to team up with CD Diagnostics to accelerate the pace of innovation in musculoskeletal diagnostics, ramp up adoption of testing into standard protocols, and arm surgeons with critical data to inform diagnosis, staging, treatment, and recovery.”

Other major competitors that have recently been involved in mergers and acquisitions in the US medical device industry include Abbott Laboratories (ABT), Stryker (SYK), and Medtronic (MDT). The PowerShares S&P 500 Low Volatility Portfolio (SPLV) invests approximately 0.88% of its portfolio in Zimmer Biomet.

Next, let’s discuss the company’s latest valuation.

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