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Medtech Losers of 2014 (Warsaw)

If you get an orthopedic implant, it’s likely the device was made in this northeastern Indiana city, also known as the orthopedics capital of the world. But orthopedics company Zimmer, with headquarters in Warsaw, is acquiring crosstown rival Biomet for $13.35 billion, and if the deal goes through, a huge cloud of uncertainty will hang over the city with a population of just over 14,000.

If you get an orthopedic implant, it’s likely the device was made in this northeastern Indiana city, also known as the orthopedics capital of the world.

But orthopedics company Zimmer, with headquarters in Warsaw, is acquiring crosstown rival Biomet for $13.35 billion, and if the deal goes through, a huge cloud of uncertainty will hang over the city with a population of just over 14,000.

Zimmer expects to get cost synergies of $270 million annually after the third year of the transaction’s close. Inevitably there will be cost reductions and layoffs. The Wall Street Journal captured the mood of the city with the headline “Zimmer-Biomet: The Deal That Shook Warsaw, Ind.” It noted that average salary of Kosciusko county residents employed in the medical equipment industry is $80,300 compared with $44,100 across all industries in the county.

Zimmer CEO David Dvorak has promised to maintain the sales force of both companies after the merger, but hasn’t said for how long. And even if sales people don’t lose their jobs, there are many that will.

“As part of any acquisition, companies talk about sales and synergies in order to justify the purchase price,” said Gregory Chodaczek, an analyst with Sterne Agee. “Even if the CEO talks about keeping the sales force intact, many will be reassigned to different products or regions and this will cause many to decide to look for employment opportunities elsewhere. In terms of back office staff, general and administrative, there will be lots of overlap in positions, which will lead to job eliminations."

Just how badly Warsaw takes it in the chin will remain to be seen.  

  

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