Last week Luxembourg-based AMPLEXOR (#9 on CSA Research's 2016 list of largest LSPs) acquired U.S.-based Sajan (#30) for US$28.5 million. This amounts to US$5.83 per share for publicly-traded Sajan, a 46% premium over the current share price. Because Sajan will go private, it has substantial disclosure and shareholder protection requirements under the U.S. Security and Exchange Commission's Rule 13e-3 Rule. That regulation also limits what it or AMPLEXOR can say now about the deal beyond just the price per share and timing.
Because CSA Research has tracked both companies for years, we can analyze why AMPLEXOR made the offer, what we expect will happen, and what it means to clients and competitors:
- AMPLEXOR is buying its way into the U.S. market. The company's strive to increase its American revenue footprint hinged on a partnership and acquisition of a firm in the life sciences sector. In combination with the latter, this deal immediately puts AMPLEXOR on the North American map with an acquisition that has marquee clients, an active salesforce, production capacity, powerful technology, and talent. Sajan's location in the U.S. heartland enables AMPLEXOR to better target the North American market and improve service to local subsidiaries of its European customers – and to up-sell Sajan's current U.S. clients with AMPLEXOR's offerings. On the flip side, it gives Sajan's services and technology more credibility with the European units of its American customers. The expanded company broadens its service repertoire. AMPLEXOR's European customer base traditionally deals with document-based content, while Sajan's practice includes software and online localization for high-tech clients. Combining the two approaches gives AMPLEXOR credibility in pitching itself as a full-service provider – and focuses its energy increasingly on general content and code issues rather than solely on language services.
- Minimal overlap means quicker integration. Both companies do the bulk of their business on their home continents. That division augurs well for combining the assets of the two firms. The respective salesforces will continue selling to their prospects, but with a broader service and product offering. Production capacity increases and it improves its follow-the-sun capability with the combination of AMPLEXOR's China and Sajan's Singapore operations. However, back-office operations such as finance and administration typically fall victim to consolidation and cost-cutting.
- Technology sweetens but complicates the deal. Sajan has consistently invested in its platform software since its founding in 1997 – over that time it built one of the better LSP in-house translation management systems. AMPLEXOR likewise built its own highly customized system. Because each firm optimized its production platform to support what clients need, AMPLEXOR must support two systems to manage projects for its different customer needs. Its biggest integration challenge will be melding the best features of both platforms while still meeting requirements of all stakeholders. Over time, we anticipate that AMPLEXOR will renovate or replace both to incorporate new processes and support for next-generation machine translation and artificial intelligence for more lights-out processing.
- AMPLEXOR acquired talent that will help it build the business. AMPLEXOR should expect Sajan's development staff to bring a lot of firepower to its evolving software platform. We anticipate strong contributions from the rest of Sajan as well, especially in the area of sales and marketing in the U.S. and in the developing content services arena. If AMPLEXOR can retain Sajan's account development staff and keep them energized, it should see increased market penetration in North America. One way would be to place Sajan's executive management in important roles at AMPLEXOR. A high-performance sales team targeting global accounts, led by the same leaders, could go a long way toward making this acquisition an engine of growth.
Most language industry deals that we've observed over the last several years focus on just a single merger and acquisition goal – domestic market consolidation, global expansion, additional services or technology, or adding brainpower. CSA Research views this transaction as a great match – more like a merger than an acquisition – that delivers on most of those targets as it expands the company's global sales and services footprint, adds new offerings, and brings it some fresh thinking.
Most importantly, this increased scale will make AMPLEXOR more competitive in the emerging arena of global content services. Our continuing research on the Localization Maturity Model has shown that companies must respond more quickly to changes in their markets and leverage an increasing array of content- and code-processing technology. These companies undergoing digital transformation are on a mission to improve the customer experience, increase operational efficiency, and develop information-powered systems. Their systems span the globe, encompassing multiple countries, languages, and systems of corporate record and social engagement – so they will need business process partners that can help them manage this content and code complexity.
We see AMPLEXOR's acquisition as another step in its march toward becoming a global content service provider (CSP), an evolution that CSA Research forecasted in 2014 as the largest language service providers added support for global content, marketing communications, customer care, and the customer experience (see Figure). The corporate drive toward digitization favors CSPs that can deal with content in any language, shape, or form as AMPLEXOR's combined resources promises.
How will this acquisition affect the market? Most of AMPLEXOR's competitors in the language sector will continue targeting translation and localization. However, visionary rivals will also position themselves to support ambitious digital transformation projects around the globe. Some of these competitors have deep pockets due to private equity funding but have yet to show their intentions. In any case, to succeed as a CSP and break away from the competition, AMPLEXOR must leverage the best human, process, and technology assets from both companies.
Once the transaction closes, the expanded company should target high-profile accounts with large U.S.-based global companies that AMPLEXOR couldn't win from Europe and that Sajan couldn't approach in the past because of its size, level of services, and maybe even its accountability to shareholders as a public company. Gaining visibility among such firms is merely the prelude to AMPLEXOR's next act as a global content service provider.