Dive Brief:

• Enovis has struck an agreement to buy orthopedics company LimaCorporate for 800 million Euros ($847 million).
• The acquisition of the Italy-based company will scale Enovis’ global reconstruction unit, creating a $1 billion business that is forecast to grow in the high single digits and generate $40 million in cost synergies over the next three years.  
• Vik Chopra, an analyst at Wells Fargo, said the acquisition was “much larger than what we were expecting,” in a conference call with Enovis management. Shares in Enovis rose 5% to $54.16 after the Delaware-based company disclosed the deal.

Dive Insight:

Enovis, formerly called Colfax, has grown its operations through a series of acquisitions since the start of the decade, globalizing its reconstruction business with the $285 million takeover of Mathys in 2021 and adding other assets to establish and build its foot and ankle business.  

“At the time [of the Mathys deal], we certainly took a hard look at Lima as an option as well and saw it as a very attractive potential strategic addition to the company. But at that time, it was not the right time for a deal like this. A few years later, after a very successful execution of Mathys, we feel like it's a great time to add a business like this and continue to strengthen our business outside the U.S.,” Enovis CEO Matt Trerotola said in a call with investors.

The takeover will give Enovis control of a company that generates most of its revenues in the extremities and hip markets, and has a geographic mix that skews toward Europe. Acquiring the company will boost Enovis’ sales to $2 billion, up from the $1.7 billion forecast for 2023, and increase the importance of reconstruction and ex-U.S. revenues. 

Lima has historically grown in the high single digits, and its growth has accelerated in the past three years, pushing the rate “well into the double digits,” Trerotola said. The Enovis CEO attributed the momentum to “some great investments that they've made in the business” while acknowledging the company has benefited from a post-pandemic boost. 

While Enovis expects the COVID-19 tailwind to let up and bring Lima back down to high-single-digit growth, Trerotola sees “cross-selling synergies ... that create the opportunity to potentially push into the double digits.” 

Enovis has identified opportunities to take costs out of the combined business, targeting $40 million in synergies over the three years after it closes the acquisition. Envois CFO Ben Berry discussed two areas where savings are expected.

“One is some operational opportunities as we think about leveraging the automated manufacturing platform. And then definitely some opportunities as you think about SG&A consolidation. Where there's duplication, there's opportunity for us to make some calls and create some synergy value that way,” Berry said on the call with investors.