Enovis (ENOV)- Problems with Its Growth Through Acquisition Strategy
Undercounted acquisition costs, overpayments, unrealistic adjustments, and more
We recently published a two-part review of healthcare companies that are growing sales and earnings through acquisitions, but whose earnings do not adequately reflect the true cost of the deals. The results can be viewed here and here. Enovis (ENOV) was one of the names we highlighted and today we will take a close look at additional concerns we have with the company.
Earlier in its history, ENOV manufactured and sold industrial fluid handling supplies and air & gas handling equipment used by power plants, the oil & gas sectors, and in welding applications. The company was built through a series of acquisitions. Between 2012-2017, it divested its fluid handling operations and built the air & gas business with 24 acquisitions.
Beginning in 2019, ENOV embarked on its unlikely transformation into a healthcare company through a series of acquisitions focusing on injury prevention products, rehabilitation, and surgical replacement joints. It also sold the air & gas handling business in 2019 and the welding unit in 2022. It continues to make acquisitions in the healthcare industry.
The takeaway is this company has been built entirely via acquisition not once, but twice! ENOV’s ROI is negative even after adding back restructuring charges and impairments, and it doesn’t post a profit without major adjustments that we believe are unrealistic. We have several areas of concern we discuss below.