On January 28th, 2025, Zimmer Biomet (NYSE and SIX: ZBH), a global medical technology leader, agreed to acquire all outstanding shares of Paragon28 (NYSE: FNA) a leading medical device company for up to $1.2bn. Under the terms of the agreement, the deal will be paid upfront, in all cash at $13.00 per share, which will result in the removal of Paragon28's common stock from the NYSE. Paragon28 shareholders will also receive a non-tradeable contingent value right (CVR) entitling them to a further $1.00 per share in cash, contingent upon the achievement of certain revenue milestones. The deal is expected to close in 2025, subject to regulatory approval.
Target Advisors: Piper Sandler & Co. (financial), Cravath, Swaine & Moore (legal)
Acquirer Advisors: Goldman Sachs & Co. (financial), Hogan Lovells US (legal)
Company Details (Acquirer – Zimmer Biomet)
Zimmer Biomet is a global leader in musculoskeletal healthcare, specialising in orthopaedic implants, surgical robotics, and digital health solutions. With over $7bn in annual revenue, the company develops innovative solutions across knee, hip, spine, and extremities, enhancing mobility and patient outcomes. Led by CEO I.Tornos, Zimmer Biomet combines industry expertise, surgeon collaboration, and cutting-edge technology to drive advancements in orthopaedic care.
Company Details (Target – Paragon28)
Paragon28 is a medical device company dedicated to advancing foot and ankle surgery through innovative solutions. As a leader in the ‘extremities’ market, Paragon28 collaborates with surgeons to develop specialised implants, biologics, and instrumentation that enhance patient outcomes and surgical precision. With a strong focus on innovation and surgeon-driven design, the company continues to redefine standards in foot and ankle reconstruction.
Deal Details and Rationale
Zimmer Biomet’s $1.2 billion acquisition of Paragon28 marks a strategic push into the high-growth foot and ankle market, a segment valued at $4.5 billion and projected to expand at a CAGR of 7.10% through to 2030. The deal reflects a slight premium on Paragon 28’s share price, emphasising Zimmer Biomet’s confidence in the scalability and profitability of the extremities sector.
Financially, Paragon28 generated $216.39 million in revenue in FY2023, growing at double-digit rates but operating at lower EBITDA margins (10–12%). In contrast, Zimmer Biomet maintained their 28-30% operating margins in 2023, presenting clear synergy opportunities in cost reduction, distribution, and R&D efficiency. With integration, Paragon28’s margins are predicted to expand to 20% within three years, potentially boosting Zimmer Biomet’s overall profitability.
Zimmer Biomet, with $7.39 billion in annual revenue, has been actively diversifying beyond hip and knee implants into high-growth areas like surgical robotics and extremities for the past decade. Deals such as Zimmer Biomet’s acquisition of LDR Holding Corporation (2016) and Embody Inc (2023), reflect Zimmer Biomet’s strategic efforts to broaden product offerings and strengthen its position in various segments of the orthopaedic and musculoskeletal markets.
This acquisition also strengthens its position against Stryker, another medical device manufacturer and the market leader in foot and ankle solutions, particularly following Stryker’s $4 billion acquisition of Wright Medical, a medical device company that specialised in orthopaedic implants and bone graft substitutes, in 2020.
The acquisition premium raises potential questions on valuation. Unlike its previous deals in orthopaedics, Zimmer Biomet is acquiring a high-growth but lower-margin company. Successful product integration and salesforce alignment will be crucial, as Paragon28 has built a specialised surgeon-driven distribution model that may not immediately fit within Zimmer Biomet’s broader, less targeted structure. Additionally, sustained higher interest rates could impact deal financing, especially if Zimmer Biomet relies on debt for financing, stretching its current 2.5x net debt/EBITDA leverage ratio. If integration challenges arise, the expected margin expansion and revenue synergies may take longer than the expected three years to materialise.
Despite the risks, this acquisition is a long-term bet on extremities, and an experimental orthopaedic segment growing faster than traditional implants and devices. If Zimmer Biomet successfully integrates Paragon 28’s portfolio, expands margins, and leverages global distribution, the deal could enhance growth, improve profitability, and position the company as a dominant player in extremities.
Written by: Karl Dumasia
Sources: Press Releases, Mergerlinks, Fitchratings
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