Med tech megamergers haven't translated to massive layoffs--at least not yet

Print 07 August 2015
Stacy Lawrence / Fierce Medical Devices

None of the giant med tech acquisitions that have closed recently have resulted in a reduction in employee count yet. Not Medtronic-Covidien, Zimmer-Biomet, nor Becton Dickinson-CareFusion. But the rumors are already swirling on where all the anticipated cost savings and redundancies will be found. That's according to the latest jobs data from EP Vantage.

An insider on the Zimmer-Biomet deal did divulge some detailsto FierceMedicalDevices on the layoffs that are anticipated there. But right now, the medical device business is actually pretty good--boosted by more covered patients due to healthcare reform in the U.S. Net sales in 102 medical device companies surveyed by the U.S. Government Accountability Office grew to $136 billion in 2014--up from $95 billion almost a decade earlier in 2005.

Some conglomerates that include med tech are spinning that business out, like Siemens, or are refocusing on it entirely to the exclusion of all else, like Philips. Those transitions involve massive shifts in employee counts--but only med tech companies were included in the EP Vantage analysis.

The Medtronic-Covidien deal has been closed a scant 6 months--with no layoffs in sight yet. In fact, even accounting for the addition of 39,500 jobs from Covidien, the number of Medtronic ($MDT) employees grew by 3,500 people, or about 7%, to a whopping 92,000 employees. It's hard to imagine a reduction in staff won't be in the cards.

During its last earnings call, Medtronic said it would achieve the anticipated at least $850 million in cost synergies that it has long-touted from the Covidien deal by the end of its fiscal 2018. Those cost savings are expected to come out of combining back-office, manufacturing and supply-chain infrastructure, as well as eliminating the redundant public company costs.

Another big deal, Sorin-Cyberonics, is on hold for now as Italian regulators further scrutinize the deal.

Astonishingly, EP Vantage found that none of the 15 largest med techs by market capitalization had any significant staff reductions last year.

The largest med tech employee reduction last year was a decline of 2,000 employees to 7,800 for diagnostics player Alere ($ALR). DJO Global, Mindray ($MR), Hologic, BioRad Laboratories and Sequenom ($SQNM) all had employee count declines anywhere from 500 to 100 in 2014, the report found.

These results are an improvement on the last time we ran this data in mid-2013, when 5 major med techs had declines in their employee counts of 500 or more.

Who were the top med tech employers adding to their head count last year? In addition to Medtronic, they were Abbott ($ABT) with 8,000; Baxter ($BAX) with 5,000; and B. Braun with more than 4,000. Stryker ($SYK) and Boston Scientific ($BSX) each also added 1,000 employees; so the former reached 26,000 while the latter hit 24,000.

As a percentage of employees, Exact Sciences ($EXAS) was the big winner, as it more than doubled its headcount to 236 to support the launch of its Cologuard colorectal stool test.

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