'Telling your story is one thing, acting on your story is another.' - Hugo da Silva on Stratasys' acquisition of Covestro AM

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Eight months after the deal was announced and much longer since the two companies first engaged, Stratasys completed the acquisition of Covestro Additive Manufacturing (AM) last week. 

As the deal closed, Stratasys commenced the integration of 60 additive manufacturing materials, a deep IP portfolio, and a highly-skilled team of material scientists to enhance its polymer 3D printing offering. 

When TCT spoke to Covestro AM VP Hugo da Silva [HDS] in August, he suggested the business combination of Stratasys and Covestro AM would represent a more powerful proposition for their joint user base. Earlier this month, we caught up with him again to discuss what the integration will look like, why the two businesses complement each other, and what da Silva's remit will be as he assumed the new position of VP of Strategy, M&A and Venturing at Stratasys.

TCT: Hugo, it’s been eight months since Stratasys’ acquisition of Covestro AM was announced. What’s your immediate reaction to the transaction being completed?

HDS: Well, the first feeling is that the project is completed. Actually, eight months of the announcement, but if I were to backdate to when we really start this project, it's about a year and a half ago. So, a really long time since the Board of Covestro allowed me to explore options until we finally complete it. It's been quite a long journey. And I mean, the feeling I have is that ‘okay, mission complete.’

We found the best home for our business, for the team, and not only myself, but the team is extremely excited to join Stratasys. We've been having interactions with Stratasys, but because of legal reasons, obviously, we could not go any further than just interaction as if we were a customer. But now, we can unleash the whole potential by being together, I'm extremely excited. Same as the team, extremely excited to now be combining the material science knowledge with hardware knowledge with software knowledge. And really see how we can go to more applications into 3D printing, create new use cases and move into manufacture, which is the goal from Stratasys, and it was also our goal.

TCT: You mention there’s been legal restrictions preventing too much progress being made since the announcement, but what has been going on since August?

HDS: Yeah, so unfortunately, like I said, from a legal perspective, we cannot really work as one company. So, the projects that we were working together as a supplier to a customer – we were already partners before – those projects that we were partnering up in the past, we start to accelerate those as much as we could because this was inside legal framework. And our team was pretty much focusing on the technologies that we already have on the pipeline. That was the reason why we were acquired, so few things on the data areas, some things on industrial manufacturing. So, we try to accelerate those prior to joining Stratasys. I would say we are a small team, right, and lots of people involved in getting this carve out done. So, we need to divide a bit of work between, keep all the key technologies that were the core which is unique and then we proudly bring uniqueness to the market. We did have a very good first quarter in the materials business before we joined Stratasys, so I think it was very nice to join with the solid results.

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TCT: So, how does the integration of Covestro AM into Stratasys look?

HDS: We've been working together in the carve out and integration process, but basically, the way Stratasys was organised, one of the business units, the Healthcare and Consumer business, they typically are more from a photopolymer base kind of materials. So, our photopolymer team, the Somos brand, gets integrated into that part of the organisation. And they start, day one, adding value on the P3 platform and the SLA platform. And on the other side, on the thermoplastic side of things, which is the Industrial business unit, also our thermoplastics team, meaning [the team] working with powders, they also start integrating into that business unit. In a way, it's a no brainer, that's why there was so many synergies by coming together, even the way we were organised was very similar. And obviously, the commercial team joins the commercial team. So, I think that actually helps accelerate some of the products that we working on. And we had several products in our pipeline for P3 platform, for SLA, also for powder, and I guess now, we can, as one company, bring these to market much faster than it was before.

TCT: Can you provide some insight into what R&D capability Covestro AM had prior to the acquisition, and how things will look now with the company integrated into Stratasys?

HDS: Yeah, I can give you one practical example, right? Without saying names, because obviously a lot of things are cooking in our kitchen, sometimes you need to be careful what you say. But, for me, the biggest advantage of having a material science technology team working with a hardware team and software is, in the past, we need to work and send samples to Stratasys and Stratasys will do the parameter [testing], send us feedback, and then we'll do it again. There'll be several interactions with these.

Now, we are inside, right? So, I'll give a very practical example. Maybe there's a roadmap in one of the machines, they'll make a hardware change in three years from now, because they couldn't see the value of doing that right now. But maybe our team, they say, ‘Hey, look, if you do the hardware change, and maybe slightly modify the software or the slicing software, look what we can get tomorrow with this material technology.’ So, those interactions obviously will change the way we will do business, same as Stratasys. It's going to influence their hardware roadmap, the software roadmap, because now we're all working together. There are no IP boundaries between us. They can say look, I cannot change the hardware because this, this and that, but if you change over to chemistry like this or curing speed like that, that can run the machine much better. So, now actually, some of the meetings I had with Yoav [Zeif, Stratasys CEO], I will say look, we were working with our hands tied, basically. Now we have all our hands, and you guys the same. And I think that's the way it's going to change.

So, every time we develop a new chemistry, we will always see which was the biggest advantage of 3D printing. You develop the material thinking about potential hardware modifications or software. That combination works better for these who can run fast production, we can create a production system that works well for that very specific application. So, that would allow us to do a lot more that rather than a generic printer, generic material, that typically would serve the prototyping market. That's the biggest advantage we have by working together.

Read more | Explained: Why Stratasys is acquiring Covestro’s additive manufacturing business

TCT: In terms of existing customers and partners aside from Stratasys, what changes?

HDS: I think our message to the market is that nothing will change, we are going to serve everyone. And I think Stratasys is very keen to understand some of the markets we are serving. Qe actually as Covestro, we were serving other machines rather than the Stratasys. So, there's no change. We will continue with that. And I think what we really need to take, if you take manufacturing, right, is what is the best for that specific application, for that specific use case? What is the best combination that will make this work? Rather than say, ‘Let's push this solution to you.’ I think that's the concept right now, we'll keep moving that.

And our customers, they truly understand that because that's the message we always bring as a material science company, that we do the best for the application. And I think for now, it'll be a transition time, there's also some trust to be built by customers. Telling your story is one thing, acting on your story is a different thing. I think the market is very confident, many of our customer to be honest, they are already Stratasys customer, a vast majority, I would say. So, they already know Stratasys, they know us, it's now how can how we can work together in this combination. 99.9% of our customers were really happy with [the acquisition]. And they gave us full support, they really understand the value behind this combination. So, I'm very happy with what we achieved with our customers. And there are always going to be one or two customers that say, 'Well, maybe I'm going to wait and see how that goes before I can do more business with you.'

TCT: In the last couple of years, Stratasys has started opening up on the materials side to take advantage of external material science expertise. How important was that for Covestro AM when looking for a buyer?

HDS: Yeah, for sure. As you can imagine, [there are] so many applications that we can do with 3D printing and honestly, the biggest limitation is materials. That's where the problem lies right now. And I think what they did by us being together, the combination of hardware, software, materials, now it's way more powerful because we can bend a bit of chemistry by accessing the inside of the hardware. But on the other hand, we also have to hold the full material science knowledge, we have people with 30 years PhD scientists that knows A to Z on material science. What happened is that also enables us to work with partner materials, other companies, it doesn't mean we have to do everything by ourselves, but that enhance the whole programme, the hybrid programme started by Stratasys. Because now we have the same knowledge.

So, we can speak the same language with other materials suppliers in order to achieve the same objectives because the chemistry that works is so big, we don't have all the toolboxes as Covestro and DSM, there are toolboxes that we need to find the market, and that depends on the application. But that actually was one of the key factors when we started this process. I saw Stratasys as the company for us to partner with because they were already thinking, 'Okay, what's the best for the use case?' And then by having a hybrid model will not only help us to develop materials together but also help other companies to help us develop those materials.

TCT: Finally, Hugo, one of the interesting aspects of the transaction being completed was your new role as Vice President of Strategy, M&A and Venturing. Can you tell us what that role will involve?

HDS: So basically, if I can oversimplify things, there are three main boxes that I'll be working on. Box number one is the strategy in use cases. It's the creation of new use cases that will drive growth of the company for the future. That's one of the boxes, like I said, there's a lot of complexity there, I'm oversimplifying for the sake of our discussion.

The second one is venturing, M&A and partnerships, because a strategic partnership can be as powerful as an acquisition or as powerful as venturing. So, by combining those three, it really depends on the tools we need to look into on the market, we'll be looking what are the tools that we need to deliver on our strategy and the use case creation that we can develop internally, and do we need a partnership or venturing or M&A. So, that's the second bucket.

And the third bucket, it's more internal, but it’s related to the audit tools in a transformation office. Because obviously, when you are changing your strategy, adding new use cases, or working with different partnerships, or venturing or M&A, you need to prepare your company to be able to address those challenges. Otherwise, you keep adding stuff and things are completely disconnected to your strategy. So, those are actually the three boxes that I'm going to address joining Stratasys. And, like I said before, I'm extremely excited. I thank Stratasys and Yoav for the trust. This is something we've been doing from a material perspective, and especially applications perspective. And I think it'll be a very interesting journey ahead of us.