About 10 years ago, 3D Systems and Stratasys were already publicly traded companies and both were in the middle of a shopping spree. Looking at the additive manufacturing (AM) publicly traded companies today – it seems there is another shopping spree in progress. As 3D Systems is again an active acquirer today (and also divesting!), this seems like an interesting time to look at 3D Systems’ shifting strategy and how it is manifested in its mergers & acquisitions (and divestitures). Perhaps there is something to be learned from that for other ecosystem players as well, as they look to expand their offering through M&A.
According to CrunchBase, 3D Systems has made 31 acquisitions to date, but the actual numbers is much larger since according to company filings it made 31 acquisitions only in the years 2009-2012. Most of these acquisitions happened in the 2009-2013 timeframe and included 3D printer manufacturers like Z Corp, software solutions like Cimatron and Simbionix, and quite a few service providers. This last group was especially controversial at the time as Stratasys was also buying up service providers – both companies set up On Demand Manufacturing services arms. Looking at the 2013 annual report and some later press releases, there were at least 15 acquisitions of service providers, 8 of them (Quickparts, Laser Reproductions, RPDG, Precision Prototyping, Provel, Paramount Industries, Formero, CRDM, Kemo, ModelMakers, and ATI) were bought for a total of over $130mm. At the time, detractors claimed it was a mistake to provide such a service as it competes with 3D Systems’ (and Stratasys’) customers. However, the companies claimed that this part of the business provided invaluable insight into the performance of 3D printers and the future needs of the market. At the time, 3D Systems has said that apart from Quickparts and Provel, it had paid on average 0.85 LTM (Last Twelve Months) revenues for the various service providers. This means that these acquisitions represent about $150mm in annual revenues, more than 20% of 3D Systems’ annual revenues in 2014.
The other acquisition theme was software, of various kinds: from CAD to CAM to simulations to specific applications and model generators. At the time the proclaimed strategy was to create a soup to nuts integrated workflow under one roof – from scan (or design) to production with AM. To that end, 3D Systems also acquired several design studios that designed 3D printable products, like FreshFiber and Freedom of Creation – focusing on applications may be something that is making a comeback today. However, it seems that the seeds of the problem lie in the definition of the integrated workflow and who is executing it. The creator (owner) of the product or part is not necessarily the manufacturer of the part or the entity owning the 3D printer. Therefore, 3D Systems aimed to unify all these target audiences under one roof and that is a tall order indeed! For one, the concerns of an owner (who wants the best outcome, IP protection, shortest lead time and a most favorable price) can be at odds with the concerns of the manufacturer that bought the 3D printers and materials (who wants efficient operations, low cost/high revenues, and safeguarding their own expertise). In addition, as mentioned before, 3D Systems’ on demand manufacturing (branded as Quickparts) competed directly with these manufacturers. A rethink was in order.
New CEO, Jeffery Graves , has restructured 3D Systems and announced a new strategy that focuses on manufacturing 3D printers and on medical applications. This required divesting some of the earlier acquisition to generate cash for new acquisitions. The company announced it is selling its on demand manufacturing unit Quickparts for $82mm to a private equity fund and it also will sell its Cimatron and GibbsCAM software offerings to another private equity fund (Battery, which has been accumulating a portfolio of manufacturing software companies). $82mm is in the range of 1x estimated revenues for the on demand unit so the multiple has increased, even if the overall price (and annual revenues) have decreased over the years. For Cimatron (which provides CAD/ CAM solutions), 3D Systems has paid $97mm in 2015 and now it was sold for $65mm including GibbsCAM (a provider of software for CNC programming).
As part of refocusing Graves has also announced some recent strategic acquisitions. On the medical focus, 3D Systems bought bio printing solutions start up Allevi with estimated revenues of under $2mm, expanding on its collaboration with United Therapeutics. The other strategic acquisition is a German software start up – Additive Works – continuing the theme of expanding its software offering. Additive Works offers simulations that help with the tricky process of metal powder bed 3D printing and is expected to be integrated into 3D Systems’ 3DXpert software. Now we come to the crucial strategic decision that 3D Systems did not make: playing well with others or in more professional software terms: providing APIs (Application Programming Interfaces) to ecosystem partners. Every other major 3D printer manufacturer has already realized that this is crucial for allowing customers to have a tailor end to end solution for their application. Even Stratasys, who was late to the industrial game, had opened a partnership program and made APIs available to its GrabCAD software (and from there to the machines). It boggles the mind that such a strategic move did not include an ecosystem view and APIs. Here’s to hoping that it did and it is on its way (it takes time and expertise to make sure the correct APIs are exposed and perform correctly).
Lastly: as other ecosystem players with (sometimes SPAC induced) deep pockets look to extend their reach, is there a lesson to be learned from 3D Systems’ experience (besides professionally providing APIs, that is)?
For more insights and information follow us on LinkedIn or subscribe to our newsletter for weekly updates. Photos from top: Lamellar heat exchanger 3D printed by 3D Systems Formnext 2019 (photo: Tessa Blokland), 3D printed beach toys by Fresh Fiber, and stacked hip cups – Formnext 2019 3D Systems booth (photo: Tessa Blokland).