TRUMPF is leaving the AM industry. The German manufacturing solutions company has sold its additive manufacturing business to the Lenbach Equity Opportunities III private equity fund, a “special situations” credit fund managed by Munich-based DUBAG Group. Special situations funds work with recapitalization, liquidating companies, or distressed firms. The idea is to profit from an event of some kind that is expected to yield a positive return, without the underlying business necessarily generating more revenue or without a corresponding boom in the market. So for example, a family is in a big fight over what to do with the family firm and who should run it; the investor would come in and come up with a deal that satisfies all concerned and be able to reap the rewards of what is a good business at a bad time.
DUBAG has around $700 million under management and focuses on companies that have between $20 to 40 million in revenue in the DACH region. The company owns Emitec Technologies, which makes metal substrates; a property manager; a chain drive company; and a PVC maker of credit and other cards. Leaning towards the industrial and solid, the company now is making a foray into additive manufacturing.
DUBAG will get both the LPBF business and the DED business from TRUMPF, and run them from Schio, Italy. Schio is the site of the TRUMPF-Sisma joint manufacturing plant, measuring 1800 square meters and previously employing 30 employees of the joint venture, which later became a sole part of TRUMPF. DUBAG will assume responsibility for all employees, including those based in Germany and the US.
Matthias Himmelsbach, Head of Additive Manufacturing at TRUMPF, said,
“We welcome the LEO III Fund, advised by the DUBAG Group, as the new owner of our Additive Manufacturing business. With the DUBAG Group, we have found a partner with whom we can further develop our product and consulting portfolio in a focused way, leverage growth opportunities, and successfully lead the business into a sustainable future.”
DUBAG Group Director Sebastian Stalter stated,
“We are very proud to have earned the trust of a family-owned high-tech company like TRUMPF and to have been selected as a partner in a competitive M&A process. We look forward to working together with the management and employees in Schio, Ditzingen, and Plymouth. Together, we aim to establish a leading, innovative solution provider in the field of metallic 3D printing.”
The new firm reportedly will focus on “application consulting, process development, automation solutions, and integration concepts covering the entire value chain,” in a sensible attempt to accelerate adoption. What’s more, the company will focus on medical, aerospace, and manufacturing. TRUMPF is one of the largest manufacturers of lasers worldwide, and also a large manufacturer of cutting and other industrial tools that use lasers. With its deep laser and industrial machinery experience, worldwide support network, and global sales network, TRUMPF should have been able to adopt and grow additive manufacturing unlike any other firm.
Instead, this is TRUMPF’s second retreat from Additive, and it is an inglorious one. When the company birthed OneClickMetal, a simple, low cost machine that could find thousands of more customers in new markets, most thought that TRUMPF was onto something. When they later sold the company to Index, even though OneClick represented an enormous growth potential to metal workshops worldwide that could afford the $120,000 machine, we knew that the writing was on the wall. This was in 2021, and that move was so paradoxically idiotic that I’ve never understood it. It was akin to Lexus selling Toyota, even though it was precisely that synergy on volume, engineering, culture, and manufacturing that would act as a flywheel and propel both to higher profitability. It never made sense to me. It would have been brilliant to be the only LPBF firm to offer both entry-level machines and larger industrial units.
One Click Metal machines, started by TRUMPF GmbH + Co. KG
TRUMPF never really did develop anything different, engaging, or completely new. I’ve heard good things about the machines, and they seem to be very solidly engineered. But, there never really seemed to be any point or direction to it. I’m only disappointed at the missed potential here, of what could have been. TRUMPF is a €5 billion revenue group, with €50 million in profits. Over the last few years, order intake was diminishing, as were revenue and profits. The company spent over €500 million on R&D and increased its headcount to 19,000. In its last annual report, TRUMPF expected order intake, especially in Germany, to continue to decline in 2024, and with weakness in machine tools as well. The company there said, “it is not only in our core business that we are exposed to fierce competition. This also poses risks for other fields in terms of market entry and market penetration. This applies to the now highly saturated photovoltaic sector and the datacom market. A similar situation exists in the Additive Manufacturing market which is characterised by price sensitive customers and a mix of established competitors and startups with new technologies.”
Is this good for TRUMPF?
The additive manufacturing market is not saturated. It is a growth market, experiencing annual growth rates of around 10% to 30%. Whereas some clients, in dental for example, are indeed price sensitive, the majority of LPBF customers are not. Indeed, customers care about better throughput, turnaround times, and yields. They want better products. At the same time, a major issue is that the machines are too expensive for companies like automobile manufacturers. We’d sell a lot more printers if the hourly or per kilo cost was significantly lower. Only recently have low-cost players emerged in LPBF, and TRUMPF used to own one of them. As it stands, AM is only around a €15 billion euro market, but it could be much bigger if improved products were launched. It is also a market that could experience significant growth if only a few CNC operations or CNC-made products could switch over to it. So it is definitely not saturated. I think that TRUMPF just lacked the vision to develop revolutionary products.
For some reason, making a low-cost 3D printer didn’t seem appealing to TRUMPF, and they also balked at making larger systems. Their salesforce never really pitched the systems hard to existing customers, and their product did not have any real differentiation. The company then decided that it was better to cut its losses and keep paying out €50 million in profits, rather than to invest in a future growth market. This is an excellent strategy if you want to keep getting paid but don’t want to leave a company for the kids. It’s not Chinese competition that is going to destroy manufacturing in Germany; it’s a lack of faith in the future and their own capabilities by German firms that will do that. It’s hard to see where future growth for TRUMPF will come from, and to see how they will invent the future if something as simple for them as making a 3D printer that is a differentiated product does not work. If you’re not going to make industry-changing cheap machines that you understand well once the opportunity presents itself, how are you going to invent the future of lasers, or machine tools?
Is this good for DUBAG?
This could be a steal for the firm. We’re not privy to the deal, but this could, quite simply, be a very good thing for the firm if they negotiated well, which I think they did. There is no LPBF company that truly masters application development for sales. Not one LPBF company is going far enough on consulting to drive growth and build more applications. Without a lot of extra investment, the company could develop a well-run business that might do OK. For the company to do well will be infinitely more complicated. The the Lenbach Equity Opportunities III fund itself reportedly only has €80 million in it. If they got this technology for free and this would be their only investment, then they could really do some interesting things. If this isn’t the case, it’s difficult to believe that they could invest enough to make this work. Current TRUMPF machines have no real differentiation, features, or performance that makes them attractive. Compare this to, for example, Sodick’s Prima unit, which can make you a custom machine for your needs. That to me is a much more exciting path forward to meeting real needs. Further specialization in something like marine, defense, antenna, satellites, or similar applications may very well give DUBAG an edge. Simply focusing on medical or manufacturing or aerospace will.not work. That train has left the station and the company will need further specialization in order to thrive. DUBAG of course could do well through just hanging in there for a few years and then flipping it to some vague Chinese company in a more upbeat market. That path to success could be a more sure-footed one that would require less work.
Is this good for the industry?
This completely sucks for us. Any other machine tool manufacturer or laser company will now consider additive manufacturing to be less interesting. TRUMPF’s failure to make a compelling LPBF printer, and their failure in execution, will be taken to mean that our industry is not thriving. At the same time, TRUMPF is very connected to family capital and family offices in Europe, as well as with other large industrial firms in one way or another. Their inability to find a strategic investor will also reflect badly on the industry. Now, in the case of Parcom, we did have a PE investor that ended up helping to build SLM up into a formidable firm. I’m not saying that I’m expecting DUBAG to squeeze this out like a tube of toothpaste, but PE firms are not typically known for their formidable long-term stewardship of technology firms. Maybe they could make a new independent LPBF firm that differentiates itself, and finds the capital and vision it needs to thrive. Let’s hope that this is the case. I’m worried, however, that one player’s lack of execution will diminish interest by strategic investors and partners for the near term. Let’s all hope that we make good on finding our own future, because we may have no other choice.