Who will you buy language services from in 2010? Your shortlist will likely be a different one than what you might pick today. Consider the history: The 5 largest LSPs in 2000 were Berlitz, Bowne, Lernout & Hauspie, Lionbridge, and Alpnet. In 2006 they were Lionbridge, L-3, SDL, TransPerfect, and RWS. In June 2005 Lionbridge absorbed Bowne which had previously picked up parts of L&H. In 2001 SDL acquired Alpnet.
Who's at the top of the heap at year-end 2006? Here's a preview of our top 20 ranking of translation companies for last year: L-3 with US$622 million, Lionbridge at US$419M, SDL at US$174.5M, and TransPerfect at US$112.8M. Following the market consolidation of the last 2 years, L-3's loss of a big government deal, and the economic pressures of offshoring, expect more changes. L-3 will likely drop off the 2007 list unless it wins its appeal with the U.S. Government Accounting Office.
Until mid-2005 we often spoke about language service providers that wanted to be number 4 to the Big 3 of Bowne Global, Lionbridge, and SDL. This week Welocalize (#18 worldwide in 2005, but by far the biggest LSP headquartered in Frederick, Maryland, USA) announced its plans to become 1 of the Big 3 language service providers. Its CEO Smith Yewell said the company will double its revenue each year for the next few years, leaping from under US$30 million last year to 60 to 120 to 240 million greenbacks in 2009. Merger and acquisition are critical pieces of this strategy.
To get there that quickly Welocalize cannot continue buying midgets, each with just a couple million dollars in revenue. That would take an enormous amount of time to find, negotiate, and integrate. Rather, Welocalize will have to buy several of its bigger rivals. On top of that, for the next 3 years everybody else in the marketplace will have to stand still, not acquire anybody, not grow organically -- and the foreign exchange markets can no longer be so unkind to the dollar as they have been over the last year.
Welocalize is a serious company with legitimate ambitions, but what they teach in business schools is that goals need to be SMART (Specific, Measurable, Achievable, Realistic, Timely). Welocalize's stated goal seems to fail some of those requirements -- and that might concern some buyers concerned with vendor stability and credibility.
The good news behind the story is that there is cash in the market and that venture capitalists see value in the language business. By showing its hand, Welocalize hopes to draw sellers out of the woodwork. And many know that Yewell's fingers have been itching to take the reins of a very large public company.
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