Breaking Away: The Business and Human Impact of Orthopedic Divestitures
To view our article on the Today’s Medical Developments Magazine website, click here.
A seismic jolt ripped through the orthopedic industry last month (October) when Johnson & Johnson announced plans to divest its Orthopaedics unit (formerly known as DePuy Synthes). The move instantly became one of the most consequential corporate restructurings in medtech history.
The announcement wasn’t a surprise to many industry insiders. The proverbial writing had been on the wall for some time as other diversified healthcare conglomerates (i.e., Stryker) have recently shifted toward higher-margin, faster-growth segments such as cardiovascular devices, oncology, and digital solutions. Yet for those whose careers and innovations were born inside the J&J ecosystem, the announcement carried emotional weight. We understand some of those sentiments (from both sides) as we’ve experienced and helped broker divestitures.
“This is less about J&J abandoning orthopedics and more about letting it grow on its own terms,” one longtime industry analyst observed. “But make no mistake—these separations ripple far beyond balance sheets.”
The orthopedic industry has seen its fair share of transformative spinoffs/reorganizations/consolidations in recent years: Zimmer Biomet Holding’s creation of ZimVie in 2022, Stryker’s divestiture of its spine unit earlier this year, and the Globus Medical-Nuvasive union in 2023. Other smaller “re-births” over the last decade include DJO Medical’s metamorphosis to Enovis, the SeaSpine-Orthofix combination, and 3M’s spin-off of Solventum (not entirely orthopedic). Given these shifts, J&J’s move appears to mark a decisive turning point in orthopedics, as it forces the entire stakeholder ecosystem—surgeons, staff, and suppliers—to confront the opportunities and anxieties that naturally arise when a century-old pillar decides to stand alone again. Industry veterans surely remember when DePuy was a stand-alone company (as recently as 1998) long before (under J&J’s ownership) it purchased Synthes in 2012.
Divestitures of this magnitude stem from strategic and financial realignment within big companies but it’s interesting to explore the motivation for divestitures and why bigger is not always better.
As devoted business channel viewers, we’ve noticed that large companies are increasingly judged by investors on growth potential and return on invested capital. While foundational, orthopedics has faced stagnant procedure growth, persistent pricing pressure, and increasing capital intensity due to robotics and navigation platforms. While there’s been excitement about these robotic solutions and even some commercial success (think Mako, Rosa, etc.), companies are now struggling to substantiate their clinical and economic benefits beyond the “cool” factor. This is now giving opportunities for new upstarts like Think Surgical and Monarch (recently acquired by Zimmer Biomet) to find a lane for market impact. They are combining the precision of enabling technologies without the huge footprint (cost or size). With the rapid growth of the ambulatory surgical centers market—now increasingly influencing orthopedics—the significance of both total cost and scale cannot be overstated.
“Public markets tend to undervalue slower-growth, capital-heavy businesses,” an industry equity analyst recently noted. “A standalone orthopedics company can unlock strategic focus and cost discipline that’s hard to achieve inside a diversified conglomerate.”
J&J’s move mirrors what many in the sector call the “focus-to-flourish” philosophy—shedding slower-moving divisions so each unit can pursue its own destiny. It’s a reverse to the “size matters” philosophy of just a few years ago. Size does matter for market impact but focus, position, and growth in each market segment matter even more. Outside of orthopedics, GE HealthCare’s 2023 spinoff from GE is a great example of unleashing growth and innovation, both organically and inorganically. DePuy Synthes stakeholders (especially their employees) must now hope for the same result.
It’s been rumored that J&J executives privately argued the spinoff would free both entities—the core Johnson & Johnson MedTech group to accelerate digital and interventional growth, and the new orthopedics entity to re-energize surgeon relationships and innovation pipelines.
The spinoff, however, poses a risk amid the renewal. When a major OEM reorganizes, vendor rosters are often re-evaluated, contracts may be renegotiated, and purchasing priorities can be redefined. Some suppliers brace for turbulence, while others see a chance to deepen partnerships and a few may find a new “open lane” for growth.
A contract manufacturing executive confided, “We’ve supported DePuy for decades. If the new DPS Orthopaedics wants to move faster, that could actually expand opportunities for partners who can deliver agility rather than just scale.” (As part of J&J, DePuy Synthes’ pace of decision-making and innovation has historically moved at a glacial pace.)
Private equity (PE) investors are paying attention, too. Orthopedics remains an $80-billion global market, fragmented and ripe for platform building. “Every divestiture creates a wave of potential opportunity,” said Daniel Sheppard, managing director for Middle Markets at MedWorld Advisors. “It creates an opening for smaller focused players to compete on innovation, and we’re already seeing buy-and-build interest from our PE industry investment partners.”
The M&A implications are obvious—newly independent companies often streamline portfolios, shedding non-core lines and acquiring complementary assets to reassert identity. Expect renewed deal activity across implants, biologics, infection coatings, surgical instruments, robotics software, and enabling technologies.
Our corporate experience (before MedWorld Advisors) has taught us the real stories lie beyond the financial headlines—with the employees, engineers, and leaders who will find themselves part of a new organization with different expectations and resources. Or, some may suddenly find themselves on the outside, staring down the next chapter in their lives. Either scenario is both exciting and scary.
“There’s uncertainty, of course, but also excitement,” a former DePuy Synthes R&D manager said. “In a smaller entity, decisions can move faster. We can get ideas from prototype to surgeon feedback in months, not years.” The good news is this type of attitude often creates entrepreneurs who drive small businesses that in turn, ultimately drive the industry’s innovation and growth globally.
Yet divestitures also test morale. Support functions that once relied on J&J’s infrastructure must rebuild systems for business development, human resources, IT, and compliance almost overnight. Leadership turnover and cultural reinvention are inevitable.
Organizational psychologists who study corporate separations note that “identity shock” is common. Employees who once identified with the stability of a healthcare icon must adapt beyond the new business card to the scrappier mindset of a mid-cap growth company. It’s a test of resilience—and an opportunity for a new generation of leaders to emerge (or not). We have seen both in similar circumstances.
“In the course of our deal-making, we’ve seen firsthand the most successful transitions occur when management acknowledges the human element early—clear communication, empowerment, and purpose alignment matter as much as financial engineering,” noted Estelle Black, business operations director at MedWorld Advisors.
Our decades of experience brokering M&A tells us that orthopedics may actually benefit from this structural evolution—at least from an investment perspective. Independent entities can pursue focused innovation agendas without internal competition for capital. The drawbacks to internal competition for capital recently played out after a business unit within a large industry conglomerate was denied the capital to purchase an innovative competitor in its segment (which seemed like an obvious win) due to the larger companies’ competing capital requirements and/or priorities.
A European investor succinctly paraphrased divestitures’ M&A potential: “These breakaways create pure-play orthopedic champions. They’ll either outperform or become highly attractive acquisition targets for global strategics and private equity.”
For the orthopedic ecosystem, the recent divestitures of this decade signal a generational shift. The industry is evolving from monolithic, vertically and horizontally integrated giants toward a network of specialized, collaborative players. This fragmentation can feel unsettling—but it also invites renewed entrepreneurial energy.
Hospitals and surgeons, increasingly measured on value-based outcomes, may benefit from smaller partners who can innovate faster and tailor solutions to clinical needs. CDMOs, software developers, and component suppliers will find new entry points to partner earlier in the innovation cycle.
Still, a former J&J DePuy Synthes divisional president cautions that optimism must be tempered with realism: “Spinoffs aren’t a cure-all. Execution risk is real, and the pressure to perform as a standalone can be immense. But with clear vision and cultural continuity, these companies can thrive.”
Corporate divestitures are easy to view as endings. In truth, they’re beginnings—new chapters written by teams given the freedom to define their own future. J&J’s separation of its Orthopaedics unit may close one historic era, but it opens another where focus, agility, and purpose could reignite innovation in musculoskeletal care. In orthopedics, as in life, separation isn’t always loss—sometimes it’s the start of renewed purpose.
About the Authors:
Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com.
Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.
To view our article on the Today’s Medical Developments Magazine website, click here.
