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February 9, 2024
3 Min Read
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At a Glance
- The layoffs are part of a restructuring program aimed at saving nearly $100 million annually over the next two years.
- Zimmer Biomet executives said the layoffs primarily target non-customer-facing roles in the back office.
- Zimmer Biomet plans to prioritize tuck-in acquisitions.
Zimmer Biomet is the latest orthopedics company to engage in layoffs this year. The Warsaw, IN-based firm said it was cutting about 3% of the more than 18,000 positions.
The layoffs are part of the company’s restructuring program set to save the company nearly $100 million a year during the next two years.
Zimmer Biomet’s announcement follows DePuy Synthes’s plan to lay off 82 employees and Tecomet’s plan to cut staff, according to a report from the Times Union Online.
MD+DI reached out to Zimmer Biomet to get a comment about the measure.
“In order to create and sustain a framework of operational excellence across Zimmer Biomet, we are making changes to further enhance our execution, commercial focus, and how we collaborate,” a spokesperson for Zimmer Biomet wrote in an email. “We will be reallocating investments and resources to best position the company for long-term growth.”
Zimmer Biomet’s President and CEO Ivan Tornos gave a bit of insight into what those cuts might look like according to transcript from Seeking Alpha.
“In terms of the restructuring, the reductions that we announced this morning, these are happening in back office,” Tornos said, according to a Seeking Alpha transcript. “I will tell you virtually all reductions are non-customer facing. And again, the changes we make in inventory and people are embedded in the guidance that we're giving.
Tuck-in M&As are on the table
Zimmer Biomet posted $7.39 billion in net sales in 2023 and had a 6.5% gain when compared to 2022’s totals. U.S. growth was 4.4% and international growth was 8.7%.
During an earnings call, Zimmer Biomet, CFO & EVP, Finance, Operations & Supply Chain Suky Upadhyay commented on the company’s recent share buyback plan and noted that it would not interfere with plans for acquisitions.
“I say, first of all, the $500 million share buyback; I think demonstrates our confidence in our outlook in the business,” Updhyay said according to a Seeking Alpha Transcript of the earnings call. “And the short answer to your question, does this imply some deterioration in M&A targets? And I would say absolutely not.”
According to the transcript, Upadhyay added, “I think based on where the company is from a firepower perspective; we feel that we've got the balance sheet strength and power as well as the forward-looking results. To really do both, we still will prioritize smart M&A as Ivan has talked about; we still favor tuck-in acquisitions to mid-size acquisitions. But even in the backdrop of doing a heightened level of share buyback, we still see very significant M&A firepower to execute that strategy as well. So the short answer again is no. We don't see this as any type of deterioration in targets.”
In a research note, BTIG analyst Ryan Zimmerman commented on the potential for future M&A.
“Given the free-cash flow generation and balance sheet strength, we expect Zimmer Biomet to still conduct tuck-ins in areas such as S.E.T., Recon, and ASC complimentary products,” Zimmerman wrote. “Deal size remains under $2 billion.”
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