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Common Sense Advisory Blogs
Welocalize Gets Major Investment to Keep On Growing
Posted by Donald A. DePalma, Nataly Kelly on November 23, 2010  in the following blogs: Business Globalization, Market Data, Translation and Localization, Best Practices
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Over the past year, Common Sense Advisory has fielded an increasing number of inquiries from venture capital firms, private equity groups, language service providers (LSPs), and other service and technology companies interested in investing in the language service sector. Yesterday, Riverside Partners announced that they were investing US$34 million in Welocalize. The companies did not release details on valuation.

Welocalize was number 15 on our list of top 35 language service providers, with US$50.3 million in 2009 revenue. That's in the sweet spot for Riverside, which invests in companies in the healthcare and technology sectors, with revenues between US$20 and 200 million. Welocalize has been increasing its focus on technology products and related services, with products such as GlobalSight (translation management), CrowdSight (crowdsourcing), and MarketSight (business intelligence).

We spoke with CEO Smith Yewell, who says that the company will use the funds for acquisition, technology development, and organic growth: "We should be able to do some interesting things." That's an understatement. With many language technology companies still booking small amounts of revenue and many of the world's 25,000+ LSPs still earning less than a few million dollars per year, Welocalize's war chest should allow it the pick of companies anxious to cash out.

In our upcoming report on LSP growth factors, we found that Welocalize is growing at one of the fastest rates among the world's largest firms, just behind fellow industry consolidator TransPerfect. The company's average growth rate across the four periods we analyzed (26.47%) puts it ahead of many of the world's other leading LSPs during the periods for which we collected data. Many of these companies lost revenue from 2008 to 2009 -- in fact, there were only eight that reported revenue increases during that timeframe.

Smaller companies should be thinking about how they might prepare themselves for acquisition, as we advised in "The Owner's Guide to Maximizing LSP Value" (Apr10) and "LSP Valuations and Public Company Comparables" (Nov10). With Welocalize armed with cash, expect some other acquisitive providers such as CLS, Language Line, Manpower, RWS, and TransPerfect to increase their hunt for more LSPs and technology.

Update: According to its filing with the U.S. Securities and Exchange Commission, RPWL Holdings, the parent of Welocalize, raised a total of US$51.8 million in this round of funding. Internal shareholders accounted for the additional US$17.8 million in investment.


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