Biomet Roars Back

Article preview from In Vivo - June, 2010

Five years ago, Biomet was in turmoil, as the board announced the company was for sale and the company's long-time CEO stepped down. The eventual buyers: a group of leading private equity firms. Biomet still faced a number of internal challenges, including fixing a spine and trauma business that was performing poorly. Critical to Biomet's turnaround was re-establishing the culture of stability that had long characterized the company. At the same time, it now has a new, more aggressive focus on capturing market share commensurate with its role as a top orthopedics company.

Biomet Roars Back

Five years ago, Biomet was in a funk. Now, the company is back, having faced down its execution problems, as well as industry-wide investigations and a global recession.

by David Cassak

• Five years ago, Biomet was in turmoil, as the board announced the company was for sale and the company's long-time CEO stepped down. The eventual buyers: a group of leading private equity firms.
• Suddenly private again, Biomet faced a number of internal challenges, including fixing a spine and trauma business that was performing poorly and dealing with an unhappy distributor network.
• On top of its own internal turmoil, Biomet's new management team was hit by two major disruptions soon after taking the reins: the DOJ investigation into industry practices and the global economic meltdown of 2008–2009.
• Critical to Biomet's turnaround was re-establishing the culture of stability that had long characterized the company. But if Biomet does seem culturally different, it is in one respect: a new, more aggressive focus on capturing market share commensurate with its role as a top orthopedics company.
• Key to gaining share: developing innovative products, a challenge in orthopedics, where incremental advances tend to be the norm.
• Now perhaps the most pressing issue for Biomet and its backers: how to find an exit in a market in which public offerings no longer exist and consolidation seems a distant possibility.

It's hard to imagine a company, particularly a public company, that's ever gone through a more difficult time than Biomet Inc. went through five years ago. "We certainly were dealing with multiple sources of disruption," notes Biomet CEO Jeff Binder, with a touch of understatement. "The company had just gone through a very public sale process," he says, a process that would eventually lead to Biomet's sale to a group of leading private equity firms. More, it was announced at the same time that Biomet's long-time leader Dane Miller, one of the company's founders and the CEO for the previous 30 years, would depart from the company.
It's not that CEOs don't leave companies – even long-standing ones – or that companies themselves don't announce their intention to explore strategic options, as it's sometimes phrased. But for a company that for so many years had been so stable and conservative, that had played its cards so close to its vest, the sudden announcements of Miller's departure and the proposed sale left many wondering what exactly was going on – it was all a very un-Biomet-like thing to have happened.
Uncertainty aside, Biomet was, at the time, plagued by a number of internal problems, most notably the under-performance of its spine and trauma business. There were also major issues with some of its internal systems, problems that strained relationships with key distributors and also promoted inefficiencies in things like manufacturing and the back office, which drained profitability.

Moreover, the coincidence of the announcements raised a lot of questions: who would buy Biomet and who would run it? Were the buyers going to be another orthopedics company or a group of private equity firms rumored to be in the hunt? In either case, did Biomet employees face job cuts? What about long-standing distributor relationships? And even once it became clear that Biomet's acquirers would be a private equity consortium, and after a new management team began to address Biomet's internal challenges, questions continued to swirl. Nervous surgeon customers and distributors worried about the company's long-term prospects and the decisions that might be made by the company's new owners, heightened by an opportunistic competitor who helped fan the flames of concern.

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