In a bold move to consolidate the additive manufacturing (AM) industry, Israeli 3D printer manufacturer Nano Dimension Ltd. (Nasdaq: NNDM) has announced its acquisition of Markforged Holding Corporation (NYSE: MKFG) in an all-cash transaction valued at $115 million. Nano Dimension will acquire all outstanding shares of Markforged at $5.00 per share, a 71.8% premium to Markforged’s stock price before the announcement.

This acquisition follows Nano Dimension’s recent agreement to purchase Desktop Metal (NYSE: DM) and positions the combined company to lead the AM market with a diverse technology portfolio. Post-acquisition, Nano Dimension, Desktop Metal, and Markforged are expected to achieve a combined revenue of $340 million, based on fiscal year 2023 data.

The acquisition offers Nano Dimension access to Markforged’s strengths in composite and metal 3D printing, including its over 15,000 installed systems and a strong gross margin of 48.3% (51.9% non-GAAP). These assets will enhance Nano Dimension’s AM product offerings, which so far include inkjet 3D printing for electronics (along with other electronics manufacturing technologies), high-resolution digital light processing (DLP) for nano- and micro-scale parts, as well as DLP for metal- and ceramic-loaded resins.

Yoav Stern, Chief Executive Officer and member of the board of directors of Nano Dimension, said, “In combining with Markforged, Nano Dimension is taking bold action in its journey towards becoming a digital manufacturing leader and being a foundational pillar of Industry 4.0. Markforged is an exceptional company with innovative AM materials and solutions for true production. Their prowess is validated by their more than fifteen thousand installed and connected systems in the field with many leading names across key industry verticals. I am excited to work with Shai Terem and his team, who have done an exceptional job developing their cutting-edge solutions. This is all the more substantial when we think about the anticipated closing of our deal with Desktop Metal. We believe the combination of Nano Dimension, Desktop Metal, and Markforged further strengthens our unique opportunity in creating value for our shareholders, customers, and employees as we work to deliver profitable growth, exceptional services, and notable career development opportunities.”

Addressing the $25 Million Lawsuit Settlement

The timing of the deal is interesting, as Markforged’s value was seriously knocked down by settling a $25 million lawsuit with Continuous Composites, impacting its cash flow. Of the $93.9 million in cash and equivalents reported by Markforged as of June 2024, $19.1 million is restricted to cover liabilities related to the lawsuit. This includes an upfront payment of $18 million due in the fourth quarter of 2024, with the remaining $7 million to be paid over the next three years.

This legal obligation could limit Markforged’s operational flexibility and reduce its near-term contribution to profitability. However, Nano Dimension’s post-acquisition cash position, expected to be around $475 million, provides a financial buffer that should mitigate the impact of the settlement and help the combined entity navigate these challenges.

Timing the Acquisition

Both the settlement and the acquisition news follow a significant interest rate cut announced by the Federal Reserve, which could lead to increased buying power by firms who were hesitant to invest in capital equipment during the preceding years of inflation. In that way, Nano Dimension’s move is timed perfectly at what could likely be Markforged’s lowest value before renewed machine purchasing by the larger market.

At the same time, The Bureau of Industry and Security (BIS), an agency within the US Department of Commerce, issued an interim final rule on new export controls for several critical technologies, including metal AM. As 3DPrint.com Macro Analyst Matt Kremenetsky pointed out, the document mentions a presumption of approval for exports to many EU countries, South Korea, Japan, and Australia and a presumption of denial for exports to China and Russia. Given these export controls, if Nano Dimension becomes a metal 3D printer manufacturer, it will benefit from increased exports.

Merging the Competition

This acquisition comes at a time of considerable upheaval in the AM industry, marked by numerous acquisition bids by Nano Dimension of Stratasys, 3D Systems, and, finally, the termination of the planned merger between Desktop Metal and Stratasys in September 2023. Despite Desktop Metal shareholders approving the merger, 78.6% of Stratasys shareholders voted against it, leading to the cancellation of the deal and the Nano Dimension acquisition, which comes to a shareholder vote on October 1.

With the acquisitions of Desktop Metal and Markforged, Nano Dimension is positioning itself as a dominant player in the AM space. The combined company will have a broad array of technologies, many overlapping in large part due to the heated competition between Desktop Metal and Markforged.

The P100 metal binder jet system from Markforged via its Digital Metal acquisition. Image courtesy of Markforged.

With a complex backstory involving Desktop CEO Ric Fulop sitting on the board of Markforged and parallel releases of filament-based metal 3D printing technologies, both firms have sued and countersued one another for years. Additionally, the two companies both acquired leading metal binder jet firms. While Desktop’s ExOne has the dominant market share in metal binder jet, Markforged bought Digital Metal to obtain the second leading market share. Altogether, this would give Nano Dimension overwhelming coverage in a rapidly growing sector, giving HP and GE stiff competition in the space.

Other overlapping product lines include the aforementioned metal filament space, with both companies offering low-cost systems for 3D printing metal-loaded materials that can be sintered into dense metal parts. These would complement Nano Dimension’s metal-loaded resin technology from Admatec, while Desktop’s ETEC products align with Nano’s small-scale DLP.

In total, Nano Dimension would become a significant competitor to the two leading manufacturers, Stratasys and 3D Systems, who have similarly diverse portfolios. However, Stratasys doesn’t produce metal 3D printers. It would be helpful for it to acquire a firm that does, such as Velo3D, but it doesn’t seem to have the funds to do so at the moment. Given the current financial issues faced by Stratasys and 3D Systems, they themselves may even be up for acquisition.

It’s hard to know how long this deal has been in the making, but it is possible to trace a somewhat continuous line from the boost of AM via COVID supply chain gaps to public listings via mergers with special purpose acquisition companies (SPACs), investments by ARK Management, the SPAC bubble, the merger drama of the last year, through to now. Given the relationships between Elon Musk and ARK’s Cathie Wood, along with SpaceX with Velo3D, it would be interesting to understand where Velo fits into this larger saga.