Zimmer Biomet: Despite Change in CEO, Dramatic Changes to the Firm's Strategy Are Unlikely

We’re surprised and disappointed by the news that Bryan Hanson has stepped down as chief executive officer at Zimmer Biomet to take a comparable position at 3M’s impending healthcare spinoff. With former COO Ivan Tornos named as the new president and CEO of Zimmer Biomet and CFO Suky Upadhyay assuming additional responsibilities for global operations and supply chain, we don’t expect any dramatic changes for now and are holding steady on our fair value estimate. We also see little to shift our thinking on Zimmer Biomet’s wide economic moat, which primarily stems from strong switching costs among surgeons. Having said that, we recognize that cultural issues were a crucial factor contributing to how bumpy the integration of Biomet was, and Hanson played a critical role in healing some of those divisions and putting the combined firm on a healthier path.