It’s early in 2024, but later this year we will see a number of corporate collisions in the 3D print industry. What could happen?
Every year there are big corporate deals that take place in our industry, but 2024 is set to be one of the biggest. That’s because there are a number of forces at work that will no doubt trigger some surprises.
While I cannot predict exactly what will happen, I can give you the basics scenarios so you can understand the sorts of things that are at play this year.
What Moves Could happen?
The terminology being used these days is “strategic moves”, but this translates to a couple of possible actions, including:
- Buying another company
- Buying certain assets of another company
- Selling a company outright
- Selling assets of a company
- Shutting down a company
- Discontinuing certain products
- Adding new products
Or combinations of the above.
Very often you will see company shares moving around, as that’s the means by which companies are traded. For example, company A might offer to buy company B by providing a combination of cash and shares in the new, larger entity. That way they can conserve cash and still have enough value to seal the deal.
Why Would a Company Take Action?
This is perhaps the most interesting aspect, as there are several reasons why a company might take one of the above actions. Here are the most common reasons:
- A technical advantage by integrating another technology
- Predicted obsolescence of current technology requiring replacement
- Desire to expand through access to another sales network or region
- Desire to lower costs by reducing combined administrative staff
- Pressure on management from investors
- Executive vanity or profit
- Inability to grow the business as it stands
- Negative operational results
As you can see, the reasons vary widely, and some make sense, while others may not. Often there are several of these active in a specific corporate situation, making moves more imperative.
This year it’s particularly dangerous for some companies due to their dependence on investment capital.
In short, multiple prominent companies accepted vast sums from investors who hoped for spectacular growth and a huge return on their investment. However, it has turned out that the technologies pursued by these companies has largely been ineffective for the majority of manufacturers, blocking the expected growth.
These companies have been operating in “growth mode”, rather than profitability in an attempt to score as much of that non-existent market as possible. Now the investors are slowing their investments, at least until someone demonstrates that big returns are actually possible.
Most of these companies are on borrowed time because they’ve been living off the investment, rather than profitable income. Without further investment a number of these companies will find themselves in dire straights before too long, and that will force them into one or more of the above strategic actions.
How Does This Happen?
This depends the structure of the companies involved. If a company is publicly traded, a takeover might simply require purchasing a majority of the shares. However, that’s easier said than done because some companies adopt a “poison pill” regime that prevents unexpected takeovers of this type.
If the companies are private, then negotiations may take place behind closed doors and we only find out once an agreement is finalized.
Asset transfers are basically sales and they’re usually easily completed, unless the buyer has acquired many companies and assets. That creates a difficult and expensive corporate situation where many things must be integrated.
Which Companies Might Be Affected?
This is hard to say, but some of this has been out in the open for months. Three companies in particular, 3D Systems, Nano Dimension and Stratasys, have been haggling over various takeover scenarios for months, and it hasn’t ended yet. My expectation is that some type of resolution will occur in 2024 among these three.
There are other companies that were once highly valued, but now have dropped precipitously. These include Shapeways, Velo3D, Desktop Metal, Markforged, FATHOM, and other privately held companies. It’s very likely some of the above will be making moves of the type described above.
What to Expect Next
We may hear rumors, or not. We may see abrupt and sudden major announcements, or we may see long public negotiations of the style seen between Stratasys and others in 2023.
Whichever way it happens, we will be around to document what happened and explain why.
