AT the time, it was seen as a dream deal — a takeover that perfectly complemented Smith & Nephew’s strengths as a company ready to exploit every opportunity in the market for replacing joints and mending broken bones.

But only 14 months later, Smith & Nephew’s £460m acquisition of Plus Orthopedics, a Swiss company that had built an apparently attractive business providing high-tech medical hardware, is looking like a sorry and expensive mistake.

Smith & Nephew chief executive David Illingworth chose his words carefully last week.

“As part of the integration of Plus, we uncovered sales practices in parts of Europe which are unacceptable,” he said.

And what exactly were these “unacceptable” practices? Illingworth wouldn’t say. However, about 30% of the sales that Smith & Nephew thought it had bought with the Plus takeover have had to be abandoned.

The discovery suggested, in the words of Merrill Lynch analyst Michael Jungling, that Smith & Nephew had been guilty of “a due-diligence blunder” when it bought the Swiss business.

Put simply, the company’s enthusiasm to do the Plus deal last year had compromised its judgment; it had allowed itself to be rushed.

Jungling said: “We believe the selling practices could potentially include illegal practices (for example, paying off hospital operators/doctors) that may have breached or contravened local laws.

“Interestingly, [Smith & Nephew] did not want to comment on whether the selling practices were illegal or whether government bodies were involved in the investigations.”

Illingworth has denied that sugeons were improperly rewarded for using devices made by Plus. But analysts are generally in agreement: whatever has been found at Plus involves substantial sums of money going to the wrong places.

Smith & Nephew is resolutely refusing to say what it has found. But the main focus of its problems is in Greece, where the company has more or less closed down its Plus operations as a result of the investigation.

Greece accounted for almost a third of Plus’s turnover. In total, it is likely to lose more than £50m in European sales this year. Profits will take a hit amounting to more than £12m.

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