Explained: Why Nexa3D is acquiring Essentium

“Is this a good season to go public? We don’t think so.”

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This week, the Nexa3D and Essentium CEOs will be meeting friends, peers and prospective customers in Frankfurt, as the 2023 Formnext event kicks off on Tuesday. 

But last week, they had a very different few days. Essentium Chief Blake Teipel had flown out to Ventura, California to dot the i's and cross the t's on a Letter of Intent that sees Essentium agree to be taken over by Nexa3D. 

Teipel and Nexa3D CEO Avi Reichental spent much of last week together, having spent much of the last few months gauging the synergies and chemistry between themselves and their businesses. As they came to an agreement on the structure of the acquisition deal (which remains undisclosed), they arrived at a perhaps not all that surprising denouement for the two companies. 

Essentium has been looking for its next step for a while, and Nexa3D was almost certainly going to integrate extrusion 3D printing into its portfolio after the acquisitions of NXT Factory and XYZ's SLS business. 

But why exactly did Nexa3D pick Essentium and vice versa? We answer the most pressing questions below. 

Why has Nexa3D deemed Essentium the best option as it expands into extrusion 3D printing?

At a high level, Nexa3D is integrating the Essentium business into its own because the HSE polymer extrusion technology and materials line-up fill a gap in the Nexa product portfolio. Its flagship Stereolithography technology has been supplemented in the last couple of years with powder bed fusion processes through the acquisitions of NXT Factory and XYZ Printing’s SLS business, leaving Fused Filament Fabrication technology as the missing piece.

But more specifically it’s because of Essentium’s material science expertise and the markets it has already penetrated. Essentium was born as a materials company before branching out into hardware, and that shows in its extensive filament offering which has grown steadily over the last 8-10 years. That potential has not been lost on Nexa3D CEO Avi Reichental and his team, and nor has Essentium’s play in the defence space.

He told TCT: “Essentium is one of the leading entities in terms of technology, market fit, and especially the demanding government and defence applications, which I saw earlier today is expected to be a 2.3 billion USD segment in the next couple of years as many DoD initiatives and applications are pointing in the direction of additive and specifically extrusion.”

And why was Nexa3D the most suitable company for Essentium to align with?

Reichental told TCT that Essentium was just one of various extrusion 3D printing outfits Nexa studied in recent months and years, suggesting discipline was required to choose the right fit for his business.

Essentium too has not been short of opportunities. Relations with the Department of Defence don’t come easy, and nor does the development and commercialisation of dozens of polymer materials. Adoption of Essentium’s technology has been steady, and when purchases of machinery slowed down as many manufacturers were faced with economic challenges, the company quickly provided a parts production service too. But through conversations with customers, it became clear that there was interest not only Essentium’s extrusion technology, but in other 3D printing processes as well. Essentium could have ploughed its own furrow, but recognised the cost and time that would take. Integrating with another company represented the best bet, and Essentium CEO Blake Teipel had found common ground with Reichental in the months and years previous.

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“We built a relationship based on a common viewpoint,” Teipel told TCT. “The viewpoint is that, in essence, additive has to be industrially relevant, has to offer a cost position that’s competitive, has to work faster and more productively with the most performant materials that you possibly can. We also are aligned on the concepts of open architecture and a high amount of control residing with the customer. So, we knew that at the outset, we thought alike in terms of what we felt the industry really needed.”

When did these conversations start, then?

Teipel and Reichental are said to have connected around the time that Essentium’s public listing via Atlantic Coastal collapsed in February 2022, though it seems things really gathered pace earlier this year.

The termination of Atlantic Coastal’s merger agreement is relevant for two reasons though. One, because had Essentium become a publicly listed company, it is unlikely it would now be about to become a Nexa3D business, and two, because it says something about the market conditions many additive manufacturing companies are currently facing.

Teipel says that Essentium pulled out of the SPAC process when it became clear that stock values were trending downwards and that the required capital would be difficult to generate. Having made the tough decision to withdraw from the SPAC deal, Teipel described Essentium as being ‘nearly on life support’ throughout 2022, before a ‘re-emergence’ in 2023 put it in a position to ‘change our economic fortune, our economic story, out circumstance.’  

“I think additive is in its own version of an economic trough right now. I think it’s down and people are wondering 'when is additive going to start growing again?' And 'what does that growth look like at a broad scale?'” Teipel said. “When we were looking at the ways to achieve growth and to be positioned to come out of an economic trough ahead of our competition, [I was thinking] I want to partner with a business that has a strong growth engine, and that’s what we found with Nexa.”

So, where do the synergies lie?

After extensive market analysis, Essentium deduced that Nexa was in a ‘class of one’ for what it needed to move the business forward, and Nexa is said to have had much the same perception of Essentium.

As Nexa integrates Essentium into its business, it expects the company’s materials expertise to benefit the entire Nexa organisation. That includes the AddiFab business Nexa acquired earlier this year – Blake and his team of materials scientists have considerable injection moulding know-how.

Reichental and Teipel have also calculated that their combined patent portfolio will be among the largest in the additive manufacturing industry, potentially in the top three. 

And then there’s the Nexa3D go-to-market engine. Essentium has done well to win contracts and build relationships in defence – the majority of Essentium’s revenue in recent years has come from adoption in this space – but Nexa’s reseller network consists of around 120 companies, which they hope can enhance the adoption of High Speed Extrusion further.

This is not, Teipel says, consolidation for consolidation’s sake.  

What is the latest with Essentium’s metal additive manufacturing technology?

Nexa’s takeover of Essentium rounds out its polymer portfolio nicely, with hardware and materials products available across Stereolithography, powder bed fusion and extrusion. But what about metals?

Through its collaboration with Headmade Materials, Nexa is already working to deliver metal 3D printing capability to its powder bed fusion line-up, but it will now also acquire the wire-DED technology that Essentium is working on.

Essentium announced the development of its metal 3D printing technology two years ago, but updates have been in short supply since as the company got its head down to iron out the creases of a nascent process. Teipel told TCT that the company’s metals plans remain intact, while Reichental noted that Nexa ‘very much believes’ in what Essentium is doing in metals.

As development continues, Essentium is receiving ongoing ‘collaborative voice of the customer’ from the US Air Force, while multiple systems have been built. Teipel says that work around grain boundaries, microstructure and metallurgy are ongoing to ensure that the technology can withstand the most demanding of applications and environments, with Reichental emphasising that their focus is on achieving the speed, costs and scale required to take these technologies into true manufacturing.

What does this deal mean for the combined company’s workforce and facility footprint?

Now that a Letter of Intent has been signed, Reichental and Teipel can really get stuck into these conversations.

What TCT knows already is that Essentium’s Austin facility will definitely remain operational, such is the deep materials science expertise in the building, and such is the location – Reichental notes Austin is a good place to be for a company working with powder bed fusion technologies.

Nexa3D also plans to stand up an AddiFab Freeform Injection Molding centre of excellence at this site, while its Ventura location was highlighted by both CEO for its machine building capacity. 

“We are not planning any facility shutdowns or anything like that,” Reichental confirmed. “To the contrary, each facility will probably get to do a little bit more.”

Does Nexa3D have plans to go public?  

Maybe, but not right now. As most readers will know, Reichental has been the CEO of a publicly listed company before, while Teipel told TCT when its SPAC agreement was announced that it was always the company’s intention to go public.

The pair clearly understand the benefits of being a publicly listed company, and believe that together they can demonstrate that the combined entity can grow profitably, but when assessing the current climate are on the same page.

“Is this a good season to go public? We don’t think so,” Reichental said, referencing the struggles of many AM companies that went public via SPACs in the last few years.

“Timing is everything,” Teipel added. “But timing doesn’t matter if you don’t focus on the first things and keep the first things first. We’re laser focused on the fundamentals of the business, and making sure we’re profitable and can have profitable growth. When you look at that, whether it’s a public company or private, early stage or late stage, that’s still a rarity in additive. By being laser focused on the fundamentals, achieving profitable growth, whenever the market turns and whenever the capital becomes available, we believe we will be positioned to be able to be responsive.”

“That’s how you create optionality for a company like Nexa,” Reichental finished. “Together with Essentium, it takes it into a different category in terms of scale. This is how we create optionality for us and for all of our constituents so that as and when there is an opportunity to go public or do something else or to continue to grow more, at least we’re in first position to take advantage of it. That’s how we’re thinking about it.”