An industry with many startups proves that the industry is on the rise; and only when mergers and acquisitions and mergers begin to happen more frequently does it prove that the industry is starting to mature. After more than a decade of low-key development, the 3D printing industry is now officially in the midst of mergers and acquisitions this year. Recently, one of the biggest stories in the 3D printing industry was the official merger of two 3D printing giants, Stratasys and Desktop Metal. 
On May 25, Stratasys and Desktop Metal reached a definitive agreement on an all-stock deal worth approximately $1.8 billion. The combined company, which combines Stratasys’ strengths in polymer 3D printing with Desktop Metal’s leadership in scale-up production, will be the first industrial AM company to cover the entire manufacturing lifecycle for both polymers and metals, from design to mass production. According to the news, the merger of the two giants is expected to generate $1.1 billion in revenue by 2025. On the one hand, with the merger of the two giants, it looks like the 3D industry has begun to centralize, even with the emergence of a monopoly player. But from another perspective, the two companies are already industry leaders, the merger in addition to complementary business, it is difficult to say that there is no need to warm up – after more than a decade of development, through several waves of ups and downs, once high hopes of 3D printing, still failed to get out of high-end manufacturing, really enter the large-scale popularization.
So what’s the deal with this Stratasys-Desktop Metal merger? What impact will this merger have on both companies and on the 3D printing industry as a whole?
1. A new leader in 3D printing with the merger of the two companies
On May 25, 2023, Stratasys, a large polymer-based industrial 3D printing company, and Desktop Metal, a pioneer in metal 3D printing, announced their merger and that they had reached a definitive agreement to complete the merger in an all-stock transaction of approximately $1.8 billion. The merger will be completed in an all-stock transaction of approximately $1.8 billion.
Stratasys CEO, Yoav Zeif, will serve as CEO of the new company, while Desktop Metal co-founder, Ric Fulop, will serve as Chairman of the Board. The board of directors will consist of 11 members, five chosen by Stratasys and six by Desktop Metal. Stratasys and Desktop Metal, the two giants of 3D printing, have been on a buying spree over the past few years in order to scale up and stay ahead of the curve.
Stratasys has focused its moves on polymers, adding three polymer technologies with the acquisitions of Xaar 3D, Origin, and RPS in 2021, and expanding its polymer materials portfolio with the acquisition of Covestro’s AM business unit in 2022. Stratasys has also been acquiring its way into the consumer market, buying MakerBot a decade ago and merging the brand with its former main competitor, Ultimaker, last May. Desktop Metal has acquired a half-dozen companies, including ExOne and EnvisionTEC, taking its technology portfolio well beyond metal additive manufacturing to encompass polymers, ceramics, and composites. However, this merger between the two giants, which has been in the works for a year, is by far the biggest deal Stratasys and Desktop Metal have made in recent years, and arguably one of the most significant mergers ever in the 3D printing space.
Why Stratasys had to acquire Desktop Metal Stratasys is a leader in polymer 3D printing, providing innovative 3D printing solutions to the aerospace, automotive, consumer products, healthcare, and education industries. While polymer-based 3D printing has a larger market share, metal printing is the fastest-growing segment, and moving into metal additive manufacturing was a natural strategic goal for Stratasys. Unfortunately, Stratasys’ development of metal printing technology has not been as successful as it could have been. When in-house R&D didn’t work, acquisitions were the only way to make it work.
In contrast, Desktop Metal, a company that has made a name for itself in metal, ceramic, and dental restorative 3D printing, with a focus on binder-jet metal 3D printing, as well as powder-bed-based multi-metal laser printing, would seem to complement and augment Stratasys’ technology solutions to a large extent. Secondly, Stratasys was one of Desktop Metal’s early investors, and the two announced a strategic partnership back in 2017, whereby Stratasys resellers were able to offer Desktop Metal 3D printers to their customers, which provided a more likely impetus for the acquisition. Therefore, Desktop Metal is an optimal option for Stratasys.
2. A monopoly in the 3D printing industry?
The CEOs of Stratasys and Desktop Metal agree that the merger has a positive strategic outlook and significant financial benefits. The possible opportunities of the merger are described below:
A Complementary Product Portfolio
Diversity of product and technology portfolios is one of the most important outcomes of the merger. Specifically, the combined company will have a broad product portfolio, and diverse additive manufacturing technologies covering polymers, metals, ceramics, composites, wood, and sand materials, and therefore be competitive in terms of additive manufacturing (AM) technologies, and solutions to compete with other additive manufacturing (AM) hardware providers that offer both metal and polymer printers, such as 3D Systems, EOS.
As a result, the combined company will provide customers with end-to-end solutions that span the entire manufacturing lifecycle, from design and prototyping to mass production and aftermarket operations. In the future, the company expects more than 50 percent of its revenues to come from end-part manufacturing and mass production, one of the fastest-growing areas of additive manufacturing (AM).
Commenting on the merger, Ric Fulop, co-founder of Desktop Metal, said, “I’m excited about the technology synergies, they’re important. This merger will drive accelerated innovation. The materials we have will propel PolyJet into mass production.
2. Strengthening Innovation
The deal will organically combine the intellectual property portfolios of Stratasys and Desktop Metal with more than 3,400 patents, and together the two giants have invested $500 million in research and development over the past four fiscal years. In addition, the combined company will have one of the largest R&D and engineering teams in the industry, comprised of more than 800 scientists and engineers, focused on driving innovation in differentiated material libraries.
3. Enriching the customer base
The merger brings complementary products and technologies across a wide range of industry verticals and use cases. The combined organization will also have a large industrial customer base of more than 27,000 customers across industries, materials, and applications, generating significant recurring revenues from the provision of consumables. The combined organization will also have superior global go-to-market capabilities, backed by best-in-class customer support, to enhance market access for well-known brands.
4. Deepen synergies
The combined company will be able to combine best-in-class AM technology from Desktop Metal with Stratasys’ well-developed distribution network. In response, Desktop Metal co-founder, Ric Fulop, said we have synergies in software and go-to-market, and we have 7,000 customers who will be introduced to a much larger distribution network than we have. It’s a marvelous combination. I can’t imagine a better partnership. The combined company is expected to realize approximately $50 million in additional run-rate cost synergies per year by 2025 through cost reductions in selling, general and administrative expenses, supply chain management and operational process optimization; and an additional $50 million in run-rate revenue synergies per year through enhanced market access. In addition, the combined company will realize an additional $50 million in run-rate revenue synergies through enhanced market access.
5. Enhanced Financial Strength
As of the first quarter of 2023, Stratasys and Desktop Metal had a total of $437 million in cash and cash equivalents, and the transaction will enhance the combined company’s financial flexibility to drive future growth by being well-capitalized and expected to achieve EBITDA margins of 10%-12% by 2025.
6. Expanded Growth Opportunities
The transaction establishes an additive manufacturing (AM) company of unique scale, with the combined business expected to realize $1.1 billion in revenue in 2025, with continued upside potential in a market of such size that it is expected to be one of the largest in the industry. Additionally, the 3D printing industry is poised to see more opportunities as the use of additive manufacturing technologies in mass production continues to expand, with consulting firm Wohlers Associates projecting that the 3D printing industry will expand to more than $100 billion by 2032.1 The combined company is expected to achieve revenues of $1.1 billion by 2025 and is expected to be one of the largest players in the industry. While both Stratasys and Desktop Metal have emphasized the opportunities that the merger will bring, it also hides risks.
First, for the companies’ mutual partners, who now face the prospect of two large customers becoming one much larger customer with much greater purchasing power and more leverage in negotiations, this means they will be in a weaker position in future business collaborations; and second, the biggest concern for the 3D printing industry as a whole is the possibility that the merged company could use its strong influence to impose technology and market monopolies, making it more difficult for upstarts to enter the market with new technologies and compete on a level playing field with large, well-entrenched companies; and finally, the risk of stifling innovation increases as companies grow in size and influence accordingly. This is because as more and more 3D printing companies are acquired, the incentive to compete and improve their technology naturally declines. As Facebook’s founder, Zucker Berg, famously said, it’s better to buy than to compete.
In short, while this merger is a good thing for both parties, as well as for customers, the risks of too much consolidation in any industry are worth noting. there is still a lot of uncertainty about the future of the 3D printing industry, but it seems likely that this is just the first step in many more major consolidations to come.
3. After the Wave, the Road Ahead Remains Bumpy
Like almost every technology industry, 3D printing has seen its share of waves, with small, consumer-grade 3D printers being the star of the hardware crowdfunding sites in 2013, and countless companies and teams jumping on the bandwagon. Unfortunately, these 3D printers didn’t really make it to the home, and only stayed at tech shows to attract visitors’ attention, and ended up gathering dust in small stores that specialize in 3D printing.
In November 2018, Adidas launched the AlphaEDGE 4D sneaker, making the world realize the possibility of 3D printing technology landing in the consumer goods industry. The technical partner of this sneaker, which was priced at more than $300 at the time, is Stratasys, one of the protagonists of this article. Since then, domestic 3D printing companies focusing on consumer goods, such as Qingfeng Technology, have begun to gain capital attention, and another wave of 3D printing boom has begun to rise.
In an interview in 2019, Yao Zhifeng, co-founder of Qingfeng Technology, depicted the future of the manufacturing industry in Geek Park: there are three protagonists on the platform: designers, manufacturing plants, and users. Designers can upload their unique designs, and users choose their favorite designs and upload 3D data; manufacturing factories combine user data and designs for customized production, and then ship the products to users. The process from design to production is entirely data transmission, leaving behind the many production and supply links of traditional manufacturing, not only significantly improving efficiency, but also changing the entire supply chain system, and the product is no longer a result of large-scale industrial manufacturing compromises but is completely suitable for the user’s customized products.
However, from sports shoes in the low to glasses and medical dentures, still in the evolution of 3D printing technology, seems to have failed to achieve the ultimate goal of reducing production and manufacturing costs – and only the latter, can really let the manufacturing side and the brand side of the bill. The 3D printing industry two giants of the embrace of warmth may be on the other hand, proved that 3D printing technology has indeed made progress, but the distance from the traditional industrial manufacturing compromises, but also to the user’s customized products. The two giants in the 3D printing industry may be proof that 3D printing technology has made progress, but there is still a long way to go before it enters the more mainstream manufacturing market.