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Welocalize Acquires Nova for Global Reach and Another Regulated Industry
Posted by Donald A. DePalma on May 10, 2016  in the following blogs: Market Data, Technology, Translation and Localization
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Welocalize CEO Smith Yewell called us two weeks ago to brief us on the acquisition of Nova Language Services. It is the U.S. company's 16th purchase of a smaller LSP since 2000, and its second since recapitalizing nearly a year ago. We discussed:

  • The acquisition. Nova is a language service provider based in Barcelona, Spain. It has been in business since 1998, with a focus on life sciences and particular expertise in CRO (clinical research organizations) supporting patient trials. More than 80% of its clients hail from the biopharma sector. Nova also does interpreting in that market, an important element in processing patient-reported outcomes (PRO) from these clinical trials.

  • The terms. The deal closed on April 26th. As is the case with most negotiations between privately held companies, the parties will not disclose financial terms. Nova founder Consol Casablanca will stay on and continue to run the company. This typically happens with an earn-out arrangement, in which the buyer pays out some of the purchase price now and more in years to come based on performance goals. Nova will operate under its own brand, but as a Welocalize company in a newly created life sciences division under Erin Wynn, its head of Regulated Services. 

  • The strategy behind the acquisition. Yewell sees synergy in Welocalize's ability to provide a full-service offering in the patent-heavy biopharma sector. Clients will begin with multilingual patent filings produced by Park IP, clinical trials supported by Nova, and then marketing and branding activities by its recently acquired Adapt Worldwide unit headquartered in London. He said that the increase in PRO interpreting activity will push Welocalize to increase its investment in that service offering.

  • A growing technology ecosystem. Each acquisition brings with it another set of products to integrate with its current solutions – for example, Adapt Worldwide and Park IP use memoQ, which Welocalize had to connect to its GlobalSight backbone. Yewell said that handoffs between the units remain a challenge, but its investor Norwest Equity Partners is supporting efforts to grow and integrate the technology. Meanwhile, Welocalize benefits from increasing software vendor investment in connectivity

  • The process of acquisition. We recalled one of our first conversations about M&A with Yewell back in 2005, in which he told us that the acquisition of Connect Global resulted from a two-year relationship between the companies.  How has the process changed?  "Not much," said Yewell. The dance that leads to acquisition is much the same today as it was 11 years ago – the companies must learn to trust each other as they build the relationship. They typically work together on joint projects. Over time, they allay any concerns about how they will meld the two organizations. 
What does this deal mean for the market? From a business standpoint, it’s a smart move for Welocalize to specialize in critical entry points to the localization process such as patents and CRO. Those are the places where translation buyers demand specialists. Companies that have complementary service offerings and a strong technology backbone can follow the life cycle and continue servicing the client well after that initial engagement. 

From a general market perspective, we see that vendor consolidation is accelerating. It reaches deeper into the LSP pool as Welocalize buys a small but recognized life sciences player in Europe. This acquisition underscores the importance of buying the most highly differentiable suppliers – those that serve regulated industries such as life sciences and financial services. Both industries have well-defined requirements for regulatory compliance, service levels, accuracy, and quality. 

The pool of LSPs in regulated sectors with expertise and desirable client lists has been shrinking. For example, last year’s purchases of Corporate Translations by RWS and of Foreign Exchange Translations by AMPLEXOR took two of the largest specialist firms in the U.S. off the market. Expect more activity as these companies are joined by major LSPs such as Lionbridge, private-equity-backed firms like Moravia, ULG, and Welocalize, and looming presences such as Capita, HP ACG, and R.R. Donnelley. Acquisitive buyers will go after these attractive verticals first, driving up the value and price of the remaining players. Most will buy a cluster of smaller companies à la Welocalize, while some will wait to make a mega-acquisition that could change the industry landscape overnight. 

 

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Keywords: Exit strategies, Interpreting, Mergers and acquisitions, Translation, Vertical market studies

  
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