After US stock markets closed on Wednesday, May 25, Bloomberg reported that “people familiar with the matter” told the website that 3D printing industry pioneer Stratasys (Nasdaq: SSYS) was “in talks” for an all-stock acquisition of Desktop Metal (NYSE: DM). Bloomberg noted the deal could happen as soon as this week, and as a result of the news, DM stock went up almost 19 points in post-market trading.
On Thursday morning, the two companies announced that the deal had gone through, and they will combine in a $1.8 billion transaction. Through the deal, Desktop shareholders will receive .123 ordinary shares of Stratasys stock, with Stratasys shareholders owning around 59 percent of the new company, and Desktop shareholders owning the remaining 41 percent.
While the merger news has a surprise element to it, it’s worth mentioning that Stratasys was an early investor in Desktop and Scott Crump was a Board Observer for the company. According to the firms, they aim to create $1.1 billion in revenue by 2025 with “a total addressable market of more than 100 billion USD by 2032.”
Although M&A activity has slowed down in both 3D printing and general industry alongside the fiscal turmoil of the last year, neither Stratasys nor Desktop Metal are strangers to M&As. Stratasys, of course, has just recently resisted three buyout offers from Nano Dimension, while Desktop went on an acquisition tear all throughout 2021.
In turn, Stratasys is getting a wide portfolio of brands, including EnvisionTEC and ExOne. And given the diversity of the investments that Desktop has made, Stratasys also has access to a rather unique set of innovative applications, including 3D printed foam and upcycled wood.
But the company’s metal holdings are still the big draw, especially the binder jetting technology that Desktop acquired in its purchase of ExOne. In this sense, Stratasys acquiring Desktop is a move along the same lines as Markforged’s 2022 acquisition of Digital Metal, only on a much larger scale.
Additionally, it is worth mentioning that of all selling points for Desktop, its ownership of ExOne is what made it arguably a bargain right now. Whether or not Desktop overpaid can be debated, as the sale happened right as the last bull market was ending, but the sale price in November, 2021 was a little over $550 million. Desktop’s entire market cap right now isn’t much higher than that, so for the price the company paid for ExOne, Stratasys gets ExOne and a whole lot more.
I’ve thought for awhile that Desktop Metal makes perfect sense as an acquisition for a larger company, and Stratasys in particular will be bolstered in terms of its expanded footprint into the largest-scale, most complex additive manufacturing (AM) technologies. Finally, there is simply the possibility that, by acquiring Desktop, Stratasys has put itself fully out of Nano Dimension’s reach, but this seems like it would only make sense if Stratasys had been planning on the acquisition anyhow.
Most importantly, the merger gets everyone’s engines revving for 3D printing M&As, which was likely at least partially the point for the aforementioned “people familiar with the matter” (McKinsey consultants? Cathie Wood?). That being a possibility follows simply from the fact that the ownership in the industry is so tightly concentrated.
This is significant not just for the people who will directly benefit from any potential M&As. It is pivotal for the entire industry, if only because a big wave of M&A’s will likely mark the moment when, from an investor’s perspective, 3D printing companies start to bottom out.
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