STP Nordic Strengthens Its Niche with New Acquisition

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Global Watchtower

Common Sense Advisory Blogs

Posted by Nataly Kelly on May 4, 2012 in the following blogs: Supplier Business Issues, Translation and Localization
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UK-based translation company STP Nordic announced today that it completed the acquisition of fellow Scandinavian language specialist Tranflex. Earlier this week, we spoke with Jesper Sandberg, the CEO and founder of STP Nordic to learn more about the acquisition and how it will affect the company’s future.

Here are some points to observe regarding the deal:

Significant boost in revenue. Sandberg confirmed that the acquisition will boost STP Nordic’s revenue by 55%. In other words, the company is buying a competitor that is roughly half its size in terms of annual turnover.
More offices, more staff. Tranflex has a staff of 15 employees – seven in Stockholm and eight in London – all of whom will be retained by STP Nordic. The British founder and owner of Tranflex, Chris Phillips, based in Stockholm, will join the STP management team.
Expanded vendor pool. One of the things that Sandberg mentioned repeatedly was that the acquisition enables STP Nordic to tap into Tranflex’s network of freelancers. Given STP Nordic’s focus on Scandinavian languages, a solid list of translators is another important reason for buying a company.
Improved workflows and technology. “We’re excited about the significantly increased supplier capacity. We believe it will lead to faster turnaround times, better technology utilization, and innovation for our clients,” Sandberg said. “This will also give us the operational flexibility to handle greater volumes and diverse project types.”

There are two important lessons for other language service providers (LSPs) to take from STP Nordic’s acquisition:

Find your differentiation and expand from there. One of the problems we see day after day is that LSPs try to be all things to all customers, offering every language, every service, and targeting every conceivable vertical market (which, we must point out, is the opposite of targeting). Staying true to its core identity as a regional language vendor is a wise strategy for a company in STP Nordic’s size range. The lesson for LSPs: To create a translation company of lasting value, find a strong point of differentiation and build on it.
Keep your friends close and your "frenemies" closer. Our past research shows that nearly every translation company derives some of its revenue from sales to its competitors. STP Nordic originally approached Tranflex in order to offer its services. Their collaboration eventually led to a discussion of whether a tighter integration might make more sense for both companies. Sandberg confirmed that, as with STP Nordic, the vast majority of Tranflex’s revenue comes from sales to other LSPs, and STP Nordic intends to keep it that way. The lesson for LSPs: Treat all of your translation company clients and competitors as if you are a potential acquisition target for them and vice versa.

In conclusion, mergers and acquisitions (M&A) are nothing new in the language services market, especially among the Top 50 translation firms. Far from being a trend, consolidation is a longstanding characteristic of this and other highly fragmented markets, something that well-known consolidators like Welocalize have already taken advantage of so far this year.

What trends should you be watching? Increasingly, smaller LSPs are demonstrating that you don’t need US$50 million in revenue in order to acquire other businesses, as we observed in “The Language Services Market: 2011.” Also, we’re seeing more companies from the East buying companies from the West, as in HiSoft’s recent acquisition of Spanish LSP Logoscript. Stay tuned for more on the acquisitions front, as we’re hearing from quite a lot of companies actively exploring M&A on both the buyer and seller side.

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