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How Zimmer Biomet Is Driving Growth through Acquisitions

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Overview

Zimmer Holdings acquired Biomet in 2015. Following the $14 billion merger, ZBH has deployed approximately $1.5 billion on eight M&A (merger and acquisition) deals. The companies are listed in the diagram below.

In 2016, ZBH focused on the expansion of its musculoskeletal portfolio. It acquired LDR Holdings to strengthen its spine segment, Cayenne Medical to boost its sports medicine segment growth, and Compression Therapy Concepts, which manufactures devices to treat deep-vein thrombosis.

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Other notable acquisitions include CD Diagnostics and Medtech. In addition, the Clinical Graphics acquisition strengthened the company’s hip implant market position. For more on these acquisitions, read Must-Know Details of Zimmer Biomet’s Clinical Graphics Acquisition and Delving into Zimmer Biomet’s Acquisition of CD Diagnostics.

Some of ZBH’s major competitors that also made big-ticket acquisitions recently include Abbott Laboratories (ABT), Stryker (SYK), and Medtronic (MDT). Investors can gain focused exposure to these companies by investing in the iShares U.S. Medical Devices ETF (IHI).

Acquisition synergies

ZBH’s net EBIT (earnings before interest and tax) synergies resulting from the Biomet integration are expected to be around $350 million by mid-2018. The realization of ~$310 million of cumulative net benefit is expected by the end of fiscal 2017, which will be reflected in the company’s 1Q17 earnings. By the end of 2016, the net EBIT synergies stood at $225 million.

ZBH’s SG&A (selling, general, and administrative) expenses are expected to be around 37.5% in 2017, lower than in 2016. The fall in these expenses is due to the expected realization of acquisition synergies.

Next, let’s discuss the company’s recent stock performance.

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