The April 13th Wall Street Journal front page article indicates that GE is analyzing hybrid transactions whereby it could be left with investments in multiple companies acquiring various GE business lines. It is well recognized that GE has made substantial investments in 3D printing in recent years approximating $2 billion after former CEO Jeff Immelt decided to go all in for 3D printing. Even after Immelt’s departure, his legacy can still be seen recently with GE boosting their stake in Arcam at the beginning of 2018.
The resulting impact on the 3D printing industry could be enormous since it is highly unusual for the fruits of a $2 billion technology investment to potentially become available to a new group of industrial companies. Since the businesses being sold are in many cases turnaround situations, it is in the best interest of both the purchaser and the seller to optimize the benefits of all transferred assets. The 3D printer industry can help itself by having its marketing resources provide comprehensive guidance to the buyers on how to optimize new and improving 3D printing technologies specific to their business.
In previous articles, we have covered the use of 3D printing for some of the products related to GE’s major business lines.
Integrating GE’s 3D printer technology and expertise with a new industrial business is going to present R&D tax credit opportunities for new and improved products and processes.
The Research & Development Tax Credit
Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
- Must be technological in nature
- Must be a component of the taxpayer’s business
- Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
- Must eliminate uncertainty through a process of experimentation that considers one or more alternatives
Since GE acquired a majority stake in Concept Laser GmbH in late 2016, the company has been expanding rapidly. Before the start of 2018, Concept Laser announced that they would be opening new offices that total over 130,000 square feet and that they would be open and operational sometime in 2019. The company announced that they plan to deliver 10,000 additive manufacturing machines from 2016-2026. Concept Laser has been at the forefront of development and innovation in the additive manufacturing space with patented technologies like LaserCUSING. LaserCUSING (CUSING is derived from the C in concept and the word Fusing) uses a high-precision laser to melt the metal filaments to create a product of the users’ choosing. Technologies like LaserCUSING and others allow Concept Laser to develop products for the dental, automotive, aerospace, medical, jewelry industries and more.
Acquisitions of innovative companies only create value for the parent company if they can harness their capabilities properly. As a multinational conglomerate, GE tries to create synergies among their subsidiaries and use each individual company to help one another grow. For example, Baker Hughes is the world’s largest oil field services company and in their 2017 10-k annual report, they disclosed the following: “…we and GE currently collaborate as per terms of the Channel Agreement (e.g. additive manufacturing; digital).” This small quote highlights just how committed GE is to additive manufacturing and its uses throughout various industries.
While shared data and other synergies would help one of these companies grow and expand their capabilities, a prospective purchaser of one of these companies would have to be very careful in negotiation and take factors like proprietary software, confidential data, IoT and patented technologies into consideration.
Dr. Louis Pasteur taught us the adage “Fortune Favors the Prepared Mind.” Hopefully the 3D printing industry is preparing for what should be a major 3D printing expansion opportunity.
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Charles Goulding and Ian Brown of R&D Tax Savers discuss the GE restructuring.