Inspired in part by the acquisition of EnvisionTEC by Desktop Metal and of Origin by Stratasys, we’ve been brainstorming about the newly hot 3D printing stocks and renewed interest from investors in our markets. Is 2021 going to be a SPACtacular year for us? Here we speculate on some Merger and Acquisitions activity that we’d like to see in 2021. We’re going to be thinking creatively about what kinds of options there are out there. See this as a fanciful look at some of the possibilities.
1. A Roll-Up for 3D Printing Services
The 3D printing service market is very fragmented. Service bureaus are usually small and local, with the business being built on trust with other local companies. In theory, scale and scope would be a huge benefit in this industry. Automation, machine, and materials are key cost drivers.
One large global player could reap huge rewards from implementing automation that significantly reduces the 30% of the part cost that comes from handling. Similarly, a large global player could take a chunk out of material costs through developing its own 3D printing materials and reducing costs through scale. In some cases, a material costs $300 per kilo while the base polymer costs $30, for example. A well-capitalized player could purchase Shapeways, several local service bureaus, and 3D Systems’ 3D printing division (DDD, which their CEO told us in the 3DPOD he may sell). The resulting business would be a truly global service bureau that could negotiate well with OEMs and build a global services brand.
2. Combining ExOne and Voxeljet
ExOne (NASDAQ: XONE) and voxeljet (NASDAQ: VJET) both essentially target the same customers. Industrial, oil and gas, transportation, marine businesses, and more all use either technology to make cost-effective metal parts. They are often compared with one another one-on-one. What’s more, both companies use different versions of the same binder jet process.
Combining both players would create a metal and casting service with global locations that could serve industry well. If we compare market caps for ExOne ($292.80M) and voxeljet ($82.21M), we can see that these companies are undervalued when compared with Desktop Metal, even though they use much of the same base technology and have more revenue. Voxeljet and ExOne stocks have meandered over the years, but there is a real opportunity to aspire to Desktop Metal heights.
3. SLM Solutions Acquisition by Berkshire Hathaway’s Precision Castparts
Precision Castparts is a large metal components manufacturer that was acquired by Berkshire Hathaway (NYSE: BRK B) for $37 billion in 2015. Making oil and gas, marine, power generation and aviation metal parts, the company is uniquely exposed to 3D printing. Relying on traditional processes that are now proven to be displaced by additive puts the firm at risk if it does not switch to 3D printing.
In the commercial space industry, firms are already quickly switching to 3D printing for new components because they are cheaper, can be lighter, can be developed more quickly, and can equal the performance of forged and cast parts. Boeing, GE and the aero engine companies are already investing heavily in 3D printing. And what could be more contrarian right now than investing in aviation? A masterstroke to quietly exit stage left, I tell you.
And what could go wrong if you invested in a German metalworking company? Of course, ExOne and voxeljet could make sense as well, but the most sense would be a deal whereby Berkshire Hathaway bought one of the largest powder bed fusion firms in metals, SLM Solutions, to give it a technological edge and lead in 3D printing for aviation by becoming an OEM.
4. EOS to Sell to FAM
Now, we all know that the Langer family doesn’t want to sell EOS, but what about to FAM, the Swedish Wallenberg family’s investment fund? Imagine just selling it in part for cash and in part for becoming a partner in FAM? FAM owns SKF, Stora Enso, and half of metal powder leader Höganäs. It also owns AM training firm Amexci and IPCO, which has deep experience in processes and extrusion. Its Combient unit is all about digitization, as well. It would be a diversification for the Langers, while giving a lead in 3D printing to the Wallenbergs.
5. Roche Buys Poieitis
Roche is doing well this year because of the high demand for diagnostic tools and tests. Poieitis makes two bioprinters and focuses on skin, tissue and tissue models. Bioprinting would be an interesting market for Roche to enter. Poieitis’s skin tissue focus shows strong potential synergy with Roche’s work there. Also, much of Roche’s existing client base would welcome a gold-standard bioprinter made by a firm they know and trust. Poieitis, on the other hand, would have to raise significant additional funding to make clinically approved products and expand its business, so a nice sale without further dilution may make sense for them.
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