Bill Gress, the CEO of Prototek, who will lead the combined firm, said,
“The Midwest Prototyping team will be a terrific complement to our core capabilities and will support our continued growth. We can now meet all of the prototyping and low volume production needs for our customers through a broad range of cutting-edge manufacturing capabilities and increased size, scale and efficiency, with the same high quality they’ve come to expect. Steve and his team are a great fit for us, and we look forward to working together to provide end-to-end digital manufacturing solutions to our customers around the country.”
Steve Grundahl, President of Midwest Prototyping, will head up Additive Manufacturing for the new combination, and said,
“Bill and the team at Prototek are the right partners for us at this pivotal time in our development. Digital and on-demand manufacturing are experiencing significant tailwinds. Joining Prototek gives our employees greater opportunities for growth, and we’re thrilled to bring even more resources and flexibility to our customers.”
Midwest started in 2001 with SLA and now runs Carbon, EOS, RPS, HP, Prodways, Stratasys, Essentium, and of course 3D Systems machines. The company has AS9100 D and ISO 9001 certifications and is active in prototypes, and also makes a lot of aerospace and automotive parts. It is an early adopter of AM Flow automation and AMT as well. The company is a well-regarded outfit and will give Prototek a wealth of 3D printing tribal knowledge. Prototek has a lot of CNC knowledge and operations. The firm does stamping, EDM wire, water jetting, milling, and more. All in all this seems a very prescient move for Prototek. In one fell swoop it has a lot of 3D printing capacity and have future-proofed their offering. It’s expanded into new businesses, where the aerospace component could become a very interesting one indeed. The company has also instantly made itself much more attractive for investment, SPACs, and other finance miracles being doled out to 3D printing firms. Prototek also has facilities on the East and West Coast and now has a facility in the middle as well. Seems like a very solid move by Prototek.
Prototek itself was recently bought by private equity firm TruArc Partners. They’re quickly moving into the 3D printing space in what looks like a roll up strategy. There are a lot of small to medium businesses in the 3D printing service world. They are almost all local, owned by founders, and have little in outside investments. These founders face renewed competition from the likes of Sandvik, Oerlikon, BASF and GKN on the one hand. These are well-funded, long-term operating industrial groups that wish to supplement their own 3D printing business by having a global service offering. Meanwhile, 3DHubs getting purchased by Protolabs, Shapeways getting a SPAC, and other companies getting SPACs mean that the small firms have tough choices to make.
- They can hang in there and hope that they won’t get crushed by the many millions that Xometry et al. have.
- They can, if they’re big enough, have their own SPAC’s.
- They can sell to another firm in order for them to then have a SPAC.
The triple exit scenario would seem a nice one: you get bought for some money, get some when the SPAC goes live, and then get to still hold a bit of a public company. Generally, we would imagine that a lot of service companies can now feel the heat. And from a financial perspective, it makes a heck of a lot of sense to roll up service businesses into one leading 3D printing service. Scale matters in 3D printing services; it used to not matter when service and low volume were king. Then a small, attentive, excellent business could be a regional champion and cater to local manufacturing firms well. This has led to many local services that are actually quite profitable in many cases. But, with the focus shifting to automation and serial production with 3D printing, a new level of investment will be required.
Post-processing equipment, conveyancing tools, automatic depowdering, new QA equipment, and many new machines would have to be acquired to stay competitive. We’ve gone from a labor and knowledge-intensive era where everyone more or less had the same five machines (3D Systems SLA, Fortus, P110, Perfactory, M290, etc.) and they didn’t change much. Now the machines are changing more and getting much more expensive. We’re entering a data, marketing, and process-driven era of true high-volume 3D printing manufacturing. The level of investment needed to play that game well is beyond all but the wealthiest or more niche local services.
At the same time, machine competition is accelerating. More machines will continually be able to outproduce previous ones much faster. We will in part see something akin to what happened with the digitization of the print industry where Bob would buy the latest Heidelberg and a year later Mary would buy a faster Indigo and both would soon fear their bank manager’s name on their caller ID. With more competition in the machine market, more investment, on an ongoing basis, is needed. I’m not sure that 3D printing as a service is a winner takes all game but I do know that scale will matter and a lot of people are going to get bought out or squeezed out. We spoke to Midwest’s founder Steve Grundahl and Bill Gress, the CEO of Prototek, to find out more.
Steve explained why they chose to go with Prototek and why now.
“The timing, it feels right, we’ve watched a few acquisition waves years ago, we weren’t ready then, we needed to be more mature and the market had to mature. It was a long process and we talked to several parties. When we met Bill and his team there was a real click, these were good down to earth people. It was a good fit culturally and from an offering standpoint it was good as well. Both of us were looking for more options.
“With this partner we could be the change agent and be their beachhead for additive. This is a great opportunity going forward. We didn’t want to go to a place where they’ve bought three or four companies already and we’d be an efficiency play. This is the perfect fit. The companies are very complimentary. “We also think that this will really help our employees grow. People now want to know, “What’s my career path? Being able to provide good resources for employees and their growth is overwhelming for a business like ours and we don’t want to lose good people. We think that this is an employee experience step change. Now we are a part of organisation that is across the country.
“When I started in 2001 I had to explain SLA technology and what we could do. I don’t have to explain 3D printing any more. People understand the problems that we can solve and the applications that there are. We will continue to grow 3D printing nibbling away at the edges of traditional manufacturing. Understanding the leverage that 3D printing can give you is what’s really important and will be the key to unlocking larger scale opportunities.”
I also asked why Steve didn’t go for the now very popular SPAC.
“At AMUG someone approached me to do a SPAC, I don’t know if I’m ready for that. It seemed like they were ready to sell me something rather than help us. I thought that this was a better option.”
Bill stated that,
“Prototek has nothing in the Additive space. We have over 2000 customers and when I came on board, right at the get go they kept asking me, “Why don’t you have 3D printing?” Our customers didn’t want to have to go to two and three different places to get their parts made, they really like to have just one.
“When Steve and I met, there was an immediate cultural match. We as people and our businesses like to solve problems and be on a one on one basis with our customers. We’re curious about our customers and technology. We really liked Midwest’s know how, expertise and people. We are very complementary right now and expect it to be an an area of growth for Prototek.
“Blue Mound Wisconsin will be our centre of the universe for Additive. And we want to grow Prototek into something much greater than we are today with the help of Midwest’s people, knowledge and experience.”
With so much CNC experience, a foray in metal 3D printing does sound obvious.
“We’ve looked at the whole additive space including metal 3D printing but we would never enter it without having experts. We now have the experts and will evaluate it over time but its not something for right now. For shareholder value and profitability continued investment in CNC and polymer 3D printing seems a better path, for right now.”
I really think that this is a very sensible acquisition and will see Prototek be able to leverage its 3D printing expertise significantly in the years to come.
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