Apollo and J&J Face a High-Stakes Orthopedics Deal

Apollo Faces Deal Risks While J&J Could Give Up Future Upside

For Apollo Global Management, Inc. (NYSE:APO), the principal risk is paying a full valuation for a business that J&J itself has been restructuring and that carries meaningful litigation exposure. Reuters reported that DePuy Synthes faces lawsuits related to its hip-replacement devices, which creates uncertainty around potential liabilities and the ultimate economics of the transaction. The reported $20 billion valuation would also represent more than twice the unit’s 2025 revenue, meaning Apollo would need meaningful margin improvement, growth, or both to generate an attractive private-equity return.

There is also execution risk: orthopedics is a specialized medical-device business where product development, regulatory approvals, surgeon adoption, and litigation outcomes can materially affect returns. Apollo’s scale reduces financing constraints, but the deal would still expose its investors to the operating and legal risks of a single large healthcare asset rather than simply earning management fees on diversified assets.

For Johnson & Johnson (NYSE:JNJ), the downside is that selling DePuy Synthes could sacrifice future upside from a business that still has considerable scale and technological opportunities. DePuy Synthes generated $9.3 billion of revenue in 2025, and its recent investments in spine implants and robotic-surgery technology indicate that management has not treated the franchise as strategically stagnant. A sale also creates the possibility that J&J receives less long-term value than it could have generated through the planned spin-off, particularly if the standalone company benefits from greater strategic focus and eventually commands a stronger valuation.

Moreover, J&J has already incurred substantial orthopedics restructuring costs, so selling immediately after that restructuring could limit the company’s ability to capture the full benefit of those investments. The choice between a sale and a tax-efficient public spin-off is therefore important: the former could provide certainty and liquidity, while the latter could preserve shareholder participation in any future recovery or margin expansion.

Conclusion

The potential transaction is more clearly positive for J&J strategically and more conditional for Apollo Global Management, Inc. (NYSE:APO) financially. J&J has already decided to separate DePuy Synthes, so a potential transaction near $20 billion could turn an ongoing portfolio restructuring into a substantial monetization event and accelerate its move toward higher-growth, higher-margin businesses.

For Apollo, DePuy Synthes offers a scaled healthcare platform with opportunities for operational improvement, but the roughly 2.2x revenue valuation, litigation exposure, and execution requirements mean the investment case depends heavily on buying at the right price and expanding profitability. Overall, J&J appears to have the cleaner near-term strategic catalyst, while Apollo’s upside is greater if it can acquire the asset at an attractive valuation and successfully unlock the margin and growth potential that J&J identified when announcing the separation.

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This article is originally published at Insider Monkey.