The additive manufacturing (AM) landscape is evolving rapidly, and legacy manufacturers are stepping into the ring. Among them is Schaeffler Special Machinery, the machine construction unit of the Schaeffler Group, which recently unveiled plans for a multi-material 3D printer ahead of automatica 2023, the international trade show for intelligent automation and robotics.
Schaeffler’s foray into 3D printing takes a significant leap with the acquisition of Aerosint, a Belgium-based startup initially bought by Desktop Metal (NYSE: DM). Aerosint’s Selective Powder Deposition (SPD) technology will now be integrated into Schaeffler’s AM systems. While the financial details of the deal have been kept under wraps, the transaction is expected to benefit both companies.
Desktop Metal will continue to collaborate with Schaeffler on the technology, focusing on binder jet 3D printing. This ongoing partnership highlights the strategic value each company sees in this technology.
Schaeffler’s Entry into 3D Printing
Schaeffler is not a small player by any means. The company was established in 1946 and has grown into a €13.9-billion behemoth, employing nearly 83,000 people worldwide. With facilities across several countries, Schaeffler has the financial clout to make substantial investments in additive manufacturing.
The acquisition comes at a time when traditional manufacturers like KraussMaffei and Arburg are strengthening their presence in the additive manufacturing industry. Schaeffler’s entry, with its multi-material capabilities, stands to offer customers a higher degree of flexibility in design, along with innovative material combinations.
Schaeffler Special Machinery recently announced that their new system is designed to combine metal and ceramics in a single build, a crucial feature that could have applications in multiple industries.
“By integrating this key future technology, Schaeffler Special Machinery, as a partner for production excellence, will be able to offer its customers a more diversified portfolio of systems, particularly for the manufacturing and medical technology sectors,” explained Bernd Wollenick, Senior Vice President Schaeffler Special Machinery.
The Schaeffler family itself is one of Germany’s wealthiest, with Georg Schaeffler having a net worth of about $9 billion and the family as a whole once maintaining about $35 billion. The family has a controlling interest in Continental AG and Vitesco Technologies, formerly Continental Powertrain. Schaeffler’s presence is global, with facilities in China, Russia, Thailand, and India, where Schaeffler India is publicly listed on the National Stock Exchange of India and the Bombay Stock Exchange.
Continental is a €41-billion automotive parts giant that supplies all major manufacturers, including Volkswagen, Daimler AG, BharatBenz, Ford, Volvo, Iveco, Schmitz, Koegel, Freightliner Trucks, BMW, General Motors, Toyota, Honda, Renault, PSA and Porsche. While all of these brands use AM in their own right, Continental itself relies on 3D printing quite significantly.
The ability to combine ceramics and metals could prove beneficial in battery production, a segment that startup Sakuu is also exploring. With a proven track record and extensive industrial experience, Schaeffler’s multi-material capabilities could impact this area significantly.
Desktop’s Financial Situation
The purchase of Aerosint was just one of many performed by Desktop Metal that allowed the company to broaden its technological and IP portfolio, partially fattening it up for what was meant to be its ultimate merger with Stratasys.
According to its most recent financial information, Desktop Metal shows total revenue of $202.245 million for the trailing twelve months, but its cost of revenue is $189.518 million, leaving a slim gross profit of $12.727 million. This gross profit is eroded by high operating expenses of $213.975 million, resulting in a significant operating loss of $201.248 million. The net income for common stockholders stands at a negative $475.496 million. Additionally, EBITDA is at a negative $418.418 million, indicating operational inefficiencies. There’s also a one-time unusual expense of $269.3 million associated with an impairment of capital assets.
In FORM 10-Q filing for Q1 2023, Desktop Metal substantially lowered the value of Aerosint from the level it estimated upon initial acquisition. The report noted: “The Aerosint acquisition included contingent consideration related to revenue metrics and technical milestones, with a fair value of $6.1 million as of the date of acquisition and a fair value of $1.8 million as of March 31, 2023.” This value dropped even more to $0.2 million according to a FORM 10-Q filing for Q2 2023.
This likely means that Aerosint did not meet the revenue metrics and technical milestones to the extent originally anticipated. Desktop Metal has already paid $1.6 million in cash and $0.8 million in shares connected with these milestones. Given the drop in fair value from $6.1 million to $0.2 million, this could indicate that the acquisition has not been as financially beneficial for Desktop Metal as expected. This may have contributed to Desktop Metal’s decision to sell Aerosint.
This rapid devaluation might raise eyebrows among shareholders, especially if they feel that the initial valuation was overly optimistic or not based on reasonable metrics and milestones. Investors might question the due diligence conducted by Desktop Metal and whether the company adequately disclosed the risks and variables involved in the acquisition.
It’s also noteworthy that the drop in valuation happened over a relatively short period and was not accompanied by gains or losses in fair value, which could be interpreted in different ways. On one hand, it might show that the company was constantly reassessing the value based on new data. On the other hand, the drastic change in value could raise questions if Desktop does not provide a clear explanation for the change in its next financial report.
Some analysts suggested that a merger with Stratasys would give Desktop Metal some much-needed capital. Now, it seems that the company needs to shed some of that fat in order to maintain its operations. Acquisitions that seemed somewhat surprising at the time they were made, such as Aerosint, may now be up for sale to help Desktop streamline its operations. One wonders if such firms as Aidro, for LPBF 3D printing of hydraulic parts, and Figur, which makes sheet metal forming technology, will be sold off, as well.
Schaeffler’s acquisition of Aerosint is aimed at strengthening its additive manufacturing capabilities. The deal appears to be a win for both sides: Schaeffler gains an innovative technology to help it maintain a competitive edge in additive manufacturing, while Desktop Metal, given its financial situation, could benefit from the immediate cash influx and reduced operational complexities. The continued collaboration between Schaeffler and Desktop Metal suggests that the sale was not a complete divestment but rather a strategic move for both companies.
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