Why Exactech Skyrocketed 31% Today

What happened

After agreeing to be taken private by global alternative asset manager TPG Capital, Exactech (NASDAQ: EXAC) jumped 31% today.

So what

Exactech makes orthopedic implant devices and related surgical instruments that it markets to hospitals and doctors. Aging baby boomers are increasing the number of orthopedic procedures done every year, and private equity manager TPG thinks it can accelerate market share over time by owning the company outright.

Exactech's founders Dr. Bill Petty and Betty Petty agree. The two founded the company in 1985 and they've committed their shares to back the $625 million deal. Shareholders will receive $42 in cash per share, a 31% premium to last Friday's close.

"As long-term healthcare investors, we aim to identify and partner with strong companies that are in growing, attractive sectors," said Todd Sisitsky, the managing partner at TPG Capital. "With their strong commitment to patients and surgeons and a comprehensive product portfolio, Exactech has strategically built a platform poised for significant growth."

Now what

TPG Capital is no stranger to the orthopedics market. The company was part of a deal that took hip and knee company Biomet private back in 2007 for $11.3 billion. TPG and its partners sold Biomet to Zimmer for $13.35 billion in 2014.

Apparently, TPG thinks it can catch lightning in a bottle again. The biggest players in this market include J&J, Zimmer Biomet, Stryker, and Smith & Nephew, and they represent an estimated 79% of the global joint replacement market. If going private provides Exactech with greater flexibility it can use to carve away at market share, then perhaps TPG can sell Exactech to one of these big players for a nice profit in the future.

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Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.