The polymer and metal additive manufacturing companies emphasize benefits of combining, but there are unspoken risks as well.
Some people judge a technology’s maturity by adoption rates or applications, but adoption curves are never as cut and dried as we might like, and applications are often too specific to serve as the basis for generalization.
If you really want to know how far a given technology has come, there’s one sure-fire way to tell: consolidation.
Up to this point, additive manufacturing companies have been generally divided along material and/or process lines. Broadly speaking, there are those working with polymers via photopolymerization or material jetting, and those working with metals via direct energy deposition or powder bed fusion. Stratasys and Desktop Metal are two of the biggest players in these respective spaces, and now they’re becoming one.
A $135 Billion Growth Opportunity
The merger of the companies was announced last week in a joint press release detailing the $1.8-billion all-stock transaction.
“We believe this is a landmark moment for the additive manufacturing industry,” said Ric Fulop, co-founder, chairman and CEO of Desktop Metal. “We are excited to complement our portfolio of production metal, sand, ceramic and dental 3D-printing solutions with Stratasys’ polymer offerings.”
“The combination with Desktop Metal will accelerate our growth trajectory by uniting two leaders to create a premier global provider of industrial additive manufacturing solutions,” echoed Yoav Zeif, CEO of Stratasys, in the same release. “With attractive positions across complementary product offerings, including aerospace, automotive, consumer products, healthcare and dental, as well as one of the largest and most experienced R&D teams, industry-leading go-to-market infrastructure and a robust balance sheet, the combined company will be committed to delivering ongoing innovation while providing outstanding service to customers.”
Not surprisingly, the two companies go to great lengths expounding the benefits of the merger, citing the broad coverage of their combined products, patents and professional engineers. Stratasys and Desktop Metal said they’ve invested more than half a billion dollars combined in R&D over the last four fiscal years, and that the new company will have one of the largest R&D and engineering teams in the industry, consisting of more than 800 scientists and engineers.
Then there are the obvious financial benefits (at least for the new company). The companies claim their post-merger enterprise has a revenue target of $1.1 billion in 2025 while saving roughly $50 million in annual costs and generating another $50 million in revenue from what the press release terms “enhanced market access.” The combined company will have more than 27,000 industrial customers across industries, materials and applications, with an expansive range of products and services, such as design, prototyping, tooling, mass production and aftermarket operations.
More specifically, the two companies have identified a $35-billion growth opportunity in dental mass production and a $100-billion growth opportunity in metal, carbides and ceramics for the automotive and consumer-electronics industries.
Stratasys + Desktop Metal = Additive Manufacturing Monopoly?
This announcement comes in the wake of two attempted acquisitions of Stratasys by other major players in the 3D printing industry. Nano Dimension made a partial tender offer for Stratasys in early April that was unanimously rejected by the latter company’s board of directors, which has stated that the all-cash offer “substantially undervalues the Company and is NOT in the interests of Stratasys shareholders.”
More recently, 3D Systems made its own bid of cash and stock for Stratasys, though a decision on this offer has not been announced at the time of writing. Whatever the outcome, there’s clearly a considerable interest in Stratasys in particular, and in consolidation across the industry as a whole.
While this merger certainly could be a good thing for customers, the risks of too much consolidation in any industry are worth keeping in mind. As companies grow larger and commensurately more influential, the risk of stifling innovation grows as well. Facebook’s founder famously quipped that, “It’s better to buy than compete,” and as more 3D printing companies are bought out, competition and hence the incentive to improve their technologies will naturally decline.
Stratasys and Desktop Metal may frame their product portfolios as complementary, but even though their processes and materials differ, there’s still considerable overlap in the components that make up their respective 3D printers. The companies that supply their microcontrollers, motors, sensors, electronics, etc. are now facing the prospect of trading two customers for a single larger one with considerably more buying power and thus greater leverage in negotiations.
The biggest worry for 3D printing as a whole is the possibility that the combined company would use its newfound level of influence to make it more difficult for upstarts to enter the market with new technologies and compete on a level playing field against an entrenched major player. There’s still a lot of uncertainty in the future of the 3D-printing industry, but what seems likely is that this is only the first of more major consolidations to come.
Here’s hoping it bodes well for additive manufacturing as a technology, and for the engineers who use it.
