Article preview from IN VIVO - May, 2012
A handful of orthopedic companies are combating sluggish markets by sticking with what they know best – selling hip and knee implants. This has created a robust opportunity for private equity investors looking to build businesses in orthopedics peripheral markets. Health care-focused PE firm Water Street Healthcare Partners last month made the latest move by agreeing to buy Breg Inc., the sports medicine business of Orthofix International NV, for $157.5 million or 1.5 times 2011 revenues of $103 million.
Article preview from IN VIVO - May, 2012
The orthopedics sector has registered some slow quarters in recent years. Hip, knee and spine sectors have all seen sagging sales while several of the businesses on the periphery – such as sports medicine – have disappointed. A handful of orthopedic companies are combating this slow growth by sticking with what they know best – selling hip and knee implants. This has created a robust opportunity for private equity investors looking to build businesses in orthopedics’s peripheral markets. Warburg Pincus first struck six years ago with the purchase of Tornier NV, the orthopedics company with a significant extremities business that staged a $162 million IPO a year ago. Tornier’s success – as well as other efforts – moved extremities closer to the mainstream of the orthopedics industry. Now, private equity investors find themselves moving even farther from the center, identifying high growth opportunities in areas like sports medicine, a slow growth market with an enormous potential for upside as active baby boomers continue to demand better ways for rehabbing from injury.
Health care-focused private equity firm Water Street Healthcare Partners last month made the latest move by agreeing to buy Breg Inc., the sports medicine business of Orthofix International NV, for $157.5 million or 1.5 times 2011 revenues of $103 million. Raj Denhoy, equity analyst at Jefferies & Company, says the sports medicine business proved to be disappointing for Orthofix, which acquired the company in 2004 for $150 million when Breg had sales of $58.3 million. Orthofix has since reprioritized its business segments. Sports medicine has been Orthofix’s lowest margin business, Denhoy points out, and ongoing litigation related to the division’s pain pumps meant that it was a drag to consolidated growth for the orthopedics company, which will now keep a close focus on its orthopedic and spine biologics and bone stimulation businesses. Water Street, however, sees opportunities for Breg, which manufactures cold therapy devices and bracing products for the knee, foot, ankle and shoulder, meeting a growing demand for sports medicine treatments.
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