Latest HPS Investment Partners News
Aug 12, 2021
Even more so than Stratasys-Objet and 3D Systems-ZCorp, the acquisition of ExOne by Desktop Metal can be considered a merger, rather than an acquisition, where two companies that operate in a similar segment join forces to leverage each other’s strengths. That is exactly what is going to happen here but what are these strengths? ExOne parts Without getting into the purely financial aspects of this transaction (which would require a dedicated review), there are many elements to consider in what is undoubtedly one of the highest-profile, and perhaps least expected, examples of consolidation to take place in AM . One reason why this union was not expected is that both companies have singled the other one out as their primary competitor, highlighting the superiority of their own vision and technology. But then again, it’s not uncommon to pretend to despise what one secretly admires. Desktop Metal parts In a “standard” transition, you’d think the more established company—ExOne was founded in 1995— would have acquired the new, rising startup with lots of new great ideas. In the world of financially driven ventures and digitalization, it is exactly the other way around: the cash-rich venture-funded startup—Desktop Metal was founded exactly 20 years later, in 2015—acquires the pioneering company to access its more consolidated processed and range of materials. A bit of AM history Bringing together the two companies is the fact that they are both very closely linked to the original inkjet 3D printing processes invented at the Massachusetts Institute of Technology (MIT) for use with metal, ceramic, and sand materials. ExOne began as the “ProMetal” division of Extrude Hone—a business unit created to develop metal 3D printers. The agreement was a forward-looking move by the late Larry Rhoades, who served for 35 years as CEO of Extrude Hone, a global supplier of machining and automation systems in Irwin, Pennsylvania. Within manufacturing, Rhoades held more than 25 patents in nontraditional manufacturing processes for machining, finishing, forming, and measurement, and he was quick to see the value 3D printing could offer manufacturing in terms of geometric design freedom, waste reduction, and increased speed to market. John Hartner, CEO of ExOne At the time, the company was promoting a “new vision for manufacturing”. In 1998, Extrude Hone launched the industry’s first commercial direct metal 3D printing machine using the binder jetting technology invented at MIT— the ProMetal RTS-300 . The first system was installed at Motorola . Extrude Hone followed that breakthrough quickly in 1999 with the R10, its second binder jet metal 3D printer. From 2002 through 2005, the company launched three new 3D printing systems, including the: R2 metal 3D printer, the X1-Lab, and the S-Print for sand casting in the foundry market. Rhoades was so confident about the future of his 3D printing venture that he sold Extrude Hone to Kennametal, a global supplier of tooling and industrial materials, and transferred the assets of the 3D printing business to The ExOne Company, LLC. Although Rhodes died unexpectedly in 2007 in a scuba diving accident, his company continued to experience rapid growth, even explosive in the 2013-2014 period, however it feel short of fully delivering a new way to produce parts and truly scale up to its fullest potential, although the new senior management team that arrived in 2019 did a lot to modernize the company’s image, products and business model. That’s where Desktop Metal came in. Additive Manufacturing 2.0 In this transaction, Desktop Metal is bringing the money to the table. After going public through a SPAC merger with Trine Acquisition Corp. and HPS Investment Partners the combined company was estimated to have an equity value of up to $2.5 billion. The transaction provided up to $575 million in gross proceeds, made up of Trine’s $300 million of cash held in trust and $275 million in fully committed common stock PIPE at $10 per share, including investments from Miller Value Partners, XN, Baron Capital Group, Chamath Palihapitiya, JB Straubel, and HPS Investment Partners. Ric Fulop, Founder and CEO at Desktop Metal, and serial AM industry entrepreneur. Ric Fulop, the visionary co-founder of Desktop Metal, together with other AM industry visionaries and pioneers such as Professor John Hart of MIT and none other than Prof. Eli Sachs, the inventor of the binder jetting process at MIT in 1993 (the first patent was obtained by ZCorp). As a co-founder at Desktop Metal, Sachs has been instrumental in the development of Single Pass Jetting, the proprietary technology utilized by the Production System. 3dpbm visited Desktop Metal in 2019 and had the unique opportunity to meet both Ric Fulop and Eli Sachs. It now seems like ages ago, not just because it was pre-pandemic, but also because at the time Desktop Metal mainly consisted of its relatively small physical HQ near Boston, MA. Fulop clarified that that was exactly the point: there is no need for massive localized factories, when the goal is creating a highly scalable digital business based on digital additive mass production (DAMP), what the company now refers to as additive manufacturing 2.0 . While 3D printing hardware companies have been focusing on developing and accelerating their build processes, Ric Fulop began looking at AM only from the point of view of production at scale. He is not the only one to have done so (other successful new entries in the AM market such as Carbon and HP have similar approaches) but Fulop is the one who is further ahead in scaling metal AM production. This (and his own background as a serial entrepreneur) is why large investors bought into Fulop’s vision and gave him the money that he used to buy two companies who have developed the most advanced AM technologies in the world, EnvisionTEC and ExOne (along with a couple of very interesting startups) but had not been able to fully scale them. Hand in hand Recently ExOne and Desktop Metal had been involved in a head-to-head competition that was interesting to watch. Both companies announced the ability to process aluminum (a key material for high throughput metal AM production, that has been traditionally very difficult to sinter) through different partnerships, both companies announced constant progress in their production systems and both companies attracted investors’ attention. Desktop Metal may have appeared to look down on ExOne’s “slow machines” while ExOne appeared skeptical of Desktop Metal’s ability to truly deliver the long-awaited Production Systems and rapidly qualify materials for it. In truth, Desktop Metal coveted ExOne’s established technologies and ExOne admired Fulop’s ability to scale businesses and raise funds. Now they are together and this will ultimately be beneficial for the AM industry as a whole. Now the ball goes to Desktop Metal and ExOne’s main competitors in the metal DAMP market: HP and GE Additive (and, to some extent, every other major AM industry player for both the metals and plastics businesses).
HPS Investment Partners Team
8 Team Members
HPS Investment Partners has 8 team members, including current Chief Administrative Officer, Faith Rosenfeld.