Big Acquisition. Get ready for the cuts!

Since we couldn’t get a limb lengthening nail approved in the 8 years that it was in development, Namal decided to pony up $3B and just buy it.

So far it’s a company that is a distant 2nd in Sports, 4th in trauma, 4th in joints, dead freaking last in robots, and now nuvasive who’s maybe 6th or 7th in spine? What’s the end game here, private equity? No ones gonna but this dumpster fire, you’ve got the worlds weakest sales force and a barely mediocre product line. Sell the wound division off to someone, it’s the one redeeming quality this company has.

 

You clearly have no clue what is going on in spine.

 

For NV to sell so low says they know something S&N doesn't. Buyer beware. Besides, they'll f--- it up. They always do.

 

It is all about capital limitations to scale. Can s&n unlock the capital to scale?

 

NUVA is public, their price is the market cap plus a premium. you can see the premium being built in with the rise in the NUVA stock price. It is not a total sales x multiple (i.e 5 or 6). The question I have is why is NUVA stock so low vs sales? How much debt do they carry?

 

It's a simple case of bad economics and poor fiscal stewardship. Over the years NUVA tleadership spent money like a bunch of drunken sailors: Big salaries, big options and big surgeon payouts. They were never focused on profitability and the crush of declining reimbursement makes the prospect of achieving profitability even more elusive.

The attraction for both parties is there's no overlap of portfolios thus the combined companies gives the new entity a more formidable product suite. The problem is NUVA doesn't make SNNs existing portfolio and better and vice versa. They will still be 4th to 5th place market share players in their core businesses. Unless they can drive scale and/or reduce back office redundancies, the deal will not be accretive and will only serve to distract from the core focus of both former entities. NUVA lacks fiscal discipline and SNN has never capitalized on any of its acquisitions. It's a safe bet the theoretical synergies will never benefit shareholders. SNN's fiscal conservatism has been tossed out the window to secure what the new CEO thinks is the missing puzzle piece to unleash SNN to become competitive for the long term. He would have better served to have taken time to study the formula that's made the co. modestly successful for many decades. SNN was never sexy but was always profitable. At the same time perhaps he should have analyzed whether adding another franchise as poorly performing business model such as NUVA is worth the tremendous risk it presents to SNN shareholders.

The big questions are: Will the conservative BOD actually let the deal go through and if it does, will the CEO be around long enough to harmonize the chaos he instigated. Perhaps the biggest challenge will be how to merge two very different cultures, neither of which are exemplary of well led companies. Maybe two negatives will produce a positive but very unlikely.

 

Sell the wound division. It’s just a commodity. We are only holding on to it because of the tradition. There’s is nothing new in wound care. The only thing we have is Pico and nows the NpWT market is becoming a commodity

 

Smith & Nephew can't sell the shit they own and claim to have a trained salesforce for. Why would anyone think they'll be successful with a spine company?