M&A Conquest in France What happens when there are fewer medium-sized LSPs?
It might be a hot summer in Paris, but mergers and acquisitions in the language space are even hotter. The French market has been transformed by finance-backed LSPs. What will this mean for different stakeholders in the language business?
One third sold out
5 out of the 15 largest French companies in the language space acquired since 2017
|Rank||Company||Revenue, million euros||Revenue data for||Acquired by||Profile|
|2||Datawords||€55.00||2017||marketing & loc|
|5||HL Trad||€16.50||2017||Technicis in 2018||translation|
|6||Mapi group||€14.00||est 2016||Icon in 2017||CRO, total revenue 70 mil euros|
|7||Linguistique Communication Informatique||€12.00||2016||Novae Group in 2018||marketing & loc|
|10||TextMaster||€10.00||2017||Technicis in 2018||translation|
|12||Telelingua France (part of Telelingua group)||€7.00||2016||Technicis in 2018||translation|
|15||Exequo||€5.30||2016||Lionbridge in 2018||videogame services|
Investment money reshapes the LSP landscape
In the past 2 years, 5 out of the 15 largest French language services companies have been acquired. Two leading finance-backed LSPs added 90 million euros in revenue by buying up smaller firms, and grew by 130 percent. Dozens of smaller deals also took place under the radar.
Benjamin du Fraysseix’s Technicis group, backed by venture capital firm Naxicap Partners, has acquired three mid-sized companies in 2018.
Platform LSP with EUR 8-10 million in revenue
Legal translation firm with EUR 16.5 million in revenue
Belgian firm with EUR 30 million revenue (7 million in France)
As a result, the group’s combined revenue jumped from 30 to 100 million euros. We expect Technicis to continue its roll-up strategy by acquiring mid-size companies in key markets.
Datawords, under the leadership of Alexandre Crazover, shopped for acquisitions outside the language industry. They added digital and content companies using finance from their investors, Cathay Capital, Bpifinance, and Capzanine.
Content agency in Belgium
Digital agency in Luxembourg
Consequently, the company’s revenue increased from 40 million euros in 2016 to 60 million euros (2018 target).
Add the acquisition of the game services firm, Exequo by Lionbridge, and the acquisition of MAPI clinical research firm by ICON, and you’ll get the picture of just how hot the French market really is for M&A.
A shrinking pool of targets
In our experience, US-based build-and-buy LSPs have been apprehensive of the French market due to a high tax burden (top-5 in Europe) coupled with the tradition of employees to unionize. Someone always protests in France – if not your own company, then airline pilots, taxi drivers, or perhaps dairy farmers are on strike, clogging roads with tractors and spilling milk in the streets. Instead of France, these investors looked for acquisition targets in Germany, Poland, Sweden, and the UK. Before they could make up their minds however, French groups made their move, and thoroughly scooped up the mid-market.
Three translation providers above 10 million euros in revenue remain private in France:
Technical & patent translations
Marketing & communications
Their question is probably – is this the right time to sell?
It’s unlikely that mid-sized LSP numbers will increase by smaller firms growing up. Challengers such as ITC, Powerling, and Labrador Translations still have a long way to go to reach 10 million euros. Organic growth rates are typically very modest in France since it is a very mature market. All of the companies in the 10+/- million euro range have been in the business for years, or even decades. The only exception is Lylo Media. Founded in 2012, Lylo Media is a dubbing and subtitling company that specializes in the explosively growing segment of media localization.
Reduced choice for customers
As the mid-sized language services companies get gobbled up by larger players, clients face fewer options. In the new vendor landscape, buyers can either go with a very large group and become one of their many clients or choose a much smaller company.
Companies acquired by Technicis continue to operate under their own brands as independent units. However, this approach of sewing together successful companies should eventually give way to optimization and integration. sales and management teams, portfolios, and software, and processes will become more uniform. Once Technicis group has a centralized vendor management function, their suppliers will face vastly different business conditions when negotiating rates and deadlines.
In the UK, two mid-sized LSPs out of the top-20 have been acquired in the past year, translate plus and Language Connect. At the same time, top providers, RWS and SDL, have put on a lot of weight via acquisitions, and the distance between them and the next translation provider looks insurmountable.
In Russia, the landscape has been reshaped by the merger of ABBYY LS/Traktat and the rapid growth of Janus. Instead of 5-6 medium-sized companies competing shoulder to shoulder as was the scene 5 years ago, today’s market is overshadowed by two players with USD 20+ million each.
In the Nordics, finance-backed LSPs are actively consolidating businesses. The leader Semantix has acquired mid-sized players, TextMinded and Amesto. Dutch LiveWords is another company very active in M&A, especially after it was acquired by Bencis Capital Partners in 2016.
France may have seen an extraordinary M&A spree, but a similar situation is also developing in the other countries.
Mid-sized companies sell like hotcakes everywhere.