By Christof Huth and Bernhard Langefeld
Although all kinds of money are being thrown at the additive manufacturing (AM) industry, the hopes pinned on it are not always realistic. Even as IPOs surge and M&As proliferate, Roland Berger urges would-be investors to look beyond the hype. Yes, the market is good, but let’s keep our feet on the ground.
Roland Berger identifies six key trends that are currently attracting abundant investment in AM, pointing to digitalization, high expected growth rates, media and marketing, low barriers to market entry, low interest rates and the industry's proximity to potent funds. But even as AM becomes a truly digital sector, the promise of overall 20%+ growth rates and more from some (media) quarters does not stand up to closer scrutiny.
"Some investors will make their returns, but definitely not all of them."
Low interest rates and comparatively easy access to cash are indeed attracting droves of new market players. The study nevertheless points out that costs (for materials, machinery and parts) are still very high, and that AM is still primarily deployed in prototyping contexts. And while the authors see signs that growing complexity could raise the barriers to entry higher, they still believe the AM space is sufficiently buoyant to withstand even the turmoil unleashed by the war between Russia and Ukraine.
The study traces AM stock performance from its first wave in 2015 to today. 2021 was an excellent year for IPOs and the momentum is continuing, with further public offerings already in the pipeline this year. M&As too had a bumper season last year, with a record 47 deals netting over EUR 2 billion in total. Roland Berger sees the resultant influx of money driving constant change and incipient consolidation in AM. Revenue multiples show that AM companies are not traded at a bargain, but double-digit growth rates are clearly enough of an incentive for investors. Both early-stage and, even more so, post-IPO funding are therefore plentiful.
The study presents a model to identify the main valuation drivers for AM companies in the high-growth phase and terminal value when the companies mature in a stable market. Accordingly, fully understanding an AM company’s business model and its competitive positioning is seen as a crucial success factor.
Citing ongoing innovation across almost every aspect of additive manufacturing , the study points out that the industry is in a constant state of flux. Referenced examples include the trend toward stronger and more lightweight parts, significant changes in the surface area that can be subjected to laser exposure at any given time, and the way in which continuous liquid polymer resin printers are delivering faster print speeds. In all these areas and more, speed, productivity, resource conservation and quality assurance are rapidly advancing – all of which add to the overall complexity of the emerging AM ecosystem.
As AM gradually makes the leap from prototyping to genuine industrial production, the study notes its potential as a viable substitute for conventional manufacturing . Although Roland Berger acknowledges that several hurdles must still be overcome before this happens, relentless and fast innovation is minimizing manual involvement and improving both repeatability and consistency as it does so.
For all the many question marks over this singularly dynamic industry, the study remains convinced that its future remains bright indeed. Given its inherent complexities, however, success for many companies will hinge on their ability to adapt to the very specific needs of each individual customer.
A new Roland Berger study probes beyond the hype surrounding additive manufacturing. It gives potential investors a realistic assessment that in no way detracts from well-founded optimism regarding this dynamic industry.
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