Acquisitions Signal Smith & Nephew’s Emerging Market Strategy

Article preview from IN VIVO - May, 2013

Smith & Nephew’s recent purchases of two trauma businesses in Brazil and India (Pró Cirurgia Especializada and Adler Mediequip Pvt. Ltd.) reflect its broader strategy to find growth in emerging markets, an attempt to offset the losses and disappointing quarters the company is seeing in established markets like Europe.

Acquisitions Signal Smith & Nephew’s Emerging Market Strategy

Article preview from IN VIVO - May, 2013

An interviewer at a recent medical device conference asked Phil Cowdy, head of corporate affairs at Smith & Nephew PLC, if the company had missed an opportunity in China. Orthopedic rivals Stryker Corp., Zimmer Holdings Inc., and even Medtronic Inc. all purchased Chinese companies – Trauson Holdings Co. Ltd.,  Beijing Montagne Medical Device Co., Ltd., and China Kanghui Holdings, respectively  to extend their reach into China’s surging orthopedics market.Smith & Nephew, in contrast, did not make a bold purchase.

Cowdy took a verbal step back. He noted that smaller companies are acquired because either their product or platform would expand an existing corporate strategy. Smith & Nephew, he says, didn’t stand to benefit from making such aggressive acquisitions because it didn’t need to do so. “We saw China as a big opportunity five or six years ago and we started to invest at that point,” Cowdy explained. “As a result, we already do over $120 million of revenue in China. We have over 1,000 people there. From our own perspective, we didn’t need to buy infrastructure. We had built it.”

Smith & Nephew may very well take a build-it-rather-than-buy-it approach in India and Brazil. However, the company will start with a foundation acquired in two recent deals. Smith & Nephew recently purchased India’s Adler Mediequip Pvt. Ltd., which includes the brands and assets of Sushrut Surgicals Pvt. Ltd., a leader in mid-tier, orthopedic trauma products for the India market. The company also acquired Pró Cirurgia Especializada (PCE), its distributor of sports medicine, orthopedic reconstruction, and trauma products in Brazil, hadn’t been formally announced. Terms of the acquisition weren’t disclosed.

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