Zimmer-Biomet Deal Unlikely to Cause Mass Layoffs, Upheaval

The news that Zimmer Holdings, Inc. has agreed to acquire Biomet Inc. was called by the Wall Street Journal "The Deal That Shook Warsaw, Ind."

The $13.35 billion acquisition solidifies Zimmer's position as the second-largest orthopedic company in the world. And it left many people wondering how secure their jobs are.

Zimmer's press release announcing the merger used the word 'complementary' four times. David Dvorak, Zimmer's CEO, was quoted in the WSJ article as saying that the combined firm would go through a "methodical planning process" to "retain the best talent in both organizations." Dvorak told the WSJ that the merged company would "work very hard" to maintain its sales employees and skilled production workers, but said there would likely be opportunities to reduce costs in other areas.

The operative word here seems to be integration, not restructuring.

Zimmer has said it expects to realize cost synergies of $270 million annually by the third year after closing. Larger purchasers can negotiate better deals with all of their suppliers, from suppliers of raw materials to the companies that make and print the packaging, and these savings will be a significant percentage of that number.

More savings will come from rationalization of that certain amount of inevitable overlap in product lines, but that's where the repeated use of 'complementary' becomes meaningful. In other words, there isn't much overlap.

While the merger of two large companies inevitably means a certain amount of redundancy, particularly in administrative functions, the fact that the two groups of employees, making complementary, not competing, products are also merging means that there is still about the same amount of production and administrative work to be done. Therefore it seems likely that most of those who do the actual work, both on assembly lines and in offices, will be safe.

At the very top, the usual case is for an extra layer of management to materialize. In a friendly takeover situation like this, executives aren't out on the street, they just get a new title.

Some middle and upper-middle management may find themselves called upon to justify their continued employment and doubtless there will be some slimming down in some sales offices, although that's where that word 'complementary' comes in again. Significant additional savings may also be found in the consolidation of support services such as distribution and advertising.

But by and large, particularly for those who punch a time clock, it may be that the biggest change they will notice will be the company name on their paycheck.

Stephen Levy is a contributor to Qmed and MPMN.