Exactech is paying dearly for its past mistakes.

The Gainesville, Fla.-based company has filed for Chapter 11 bankruptcy protection, succumbing to the “unsustainable” litigation costs associated with its recalled hip and knee implants.

“Our team has delivered strong performance and positive growth in 2024, and we are confident in the trajectory of our business,” Exactech President/CEO Darin Johnson said in a news release. “However, despite the strength of the underlying business, we face unsustainable liabilities associated with knee and hip litigation related to the packaging recalls we voluntarily initiated between 2021 and 2022. We take our commitment to patient well-being very seriously and have provided substantial out-of-pocket patient reimbursements and surgeon support for related expenses. The process we are starting today is intended to help us create a stronger foundation for long-term growth with an improved balance sheet and new capital as well as ensure that we can continue providing innovative, industry-leading implants for surgeons and their patients for years to come.”

Exactech signed a comprehensive restructuring and asset purchase agreement with a group of existing investors that support its Chapter 11 filing. The investor group will serve as the “stalking horse” bidder to acquire substantially all of the company’s assets and provide about $85 million of additional financing to fund its continuing operations.

Exactech will continue to operate “normally” during the restructuring, but it will be relieved from non-operating legacy liabilities. The restructuring also will facilitate an infusion of new capital and better position the business to fulfill its mission to be a surgeon partner in orthopedics.

“We have determined that a court-supervised sale is the best path forward for our stakeholders,” Johnson said. “Our investor group recognizes the strength of our team, our surgeon relationships, and our product portfolio, and we look forward to working with them throughout this process. The investor group shares a commitment to Exactech’s goals and is excited about further opportunities to drive innovation and growth.”

The sale is being conducted pursuant to a voluntary reorganization process supervised by the U.S. Bankruptcy Court for the District of Delaware and is subject to higher and better bids, court approval, and other customary closing conditions.

Exactech filed various “first-day” motions seeking court approval to maintain ordinary course operations throughout the sale process, including the ability to pay employees and sales representatives. In addition, the company will continue its research and development efforts during the process, ensuring its commitment to advancing its product portfolio.

The investor group is led by private equity and alternative asset management firms collectively representing more than $25 billion under management, with dozens of portfolio companies and extensive operational expertise, including in the medical technology and device manufacturing industries.

Ropes & Gray LLP is serving as Exactech’s legal advisor in connection with this process. Centerview Partners and Riveron RTS are serving as the company’s investment banker and financial advisor, respectively. Kroll is Exactech’s claims agent.

Exactech is a global medical technology developer of implants, surgical instruments, and the Active Intelligence (AI) ecosystem of smart technologies.