Another month, another acquisition. Private equity investors have deemed the highly-fragmented language market to be ripe for consolidation, and right in front of our eyes, consolidation is happening.
Larger language service companies keep filling gaps in their expanding service portfolios by acquiring small specialists. Smaller firms sell when it’s time for the owners to retire, or when the challenge of constantly upping the game becomes too draining. New entrants mushroom in the climate that accommodates quick cash-ins after a few years of aggressive growth.
It is now five years since I was last involved in an acquisition. It was my fourth, and I was on the buying side. I belong to the growing number of translation professionals who have been in this business for more than 20 years and have many merger and acquisition tales to tell. People like me are not the owners and brokers who sit at the negotiation table, yet in our own way, we have become M&A experts. We gather the data for the due diligence, tackle the delicate internal communications, plan the operational integration and implement change on the shop floor. We are a well of wisdom when it comes to deciding how change management should – and should not – be carried out.
The company I work for functions as a production partner within the language industry. Our client base is made up of 400 other translation companies. Most mergers and acquisitions in the market impact on us one way or the other. For instance, if both of the merging companies are our clients, we face an inevitable change in preferred technology, discount models and project management workflows somewhere down the line. The same is likely to happen if one of our clients is bought by an LSC that has not used STP’s services before, plus we have the added challenge of convincing the new owners of our unique value as a production partner. When a merger happens between two LSCs who don’t yet know STP, it’s an opportunity for us to introduce ourselves, as it’s typically the larger language service companies who can fully deploy the benefits of working with a supplier like us.
Consolidation is a positive trend – it is a process that combines a number of variants into a more effective and cohesive whole. But when we eulogise about the language industry consolidating, is it really a creation of a stronger and more solid entity that we are seeing?
The industry is certainly consolidating in the sense that the revenue from the content owner clients is concentrating in the hands of fewer and bigger players. But the language industry consists of more than the MLVs that sell services and solutions to the end-clients. Beneath that surface level, in the deep layers of the supply chain where the work is manipulated with technology and outsourced for linguistic production, the tell-tale signs of strength, solidity, efficiency and coherence are not quite so much in evidence. The subcontracted work remains as fragmented as ever, best practices are universally questioned, and for the bottom link of the chain who actually carries out the production work, the setup and admin of each new assignment takes longer than it did five years ago.
The translation companies who get to talk to today’s content owners say that the translation buyers are now more interested in the value of the service than the basic unit price per word. They are asking for increased transparency in the supply chain, they want to track who their resources are, how they are used, and what the decisions down the chain were based on. This shines a welcome spotlight onto the grass root levels of our business.
STP has adhered to its market position and business model for almost twenty years, but where ten years ago we were working in five CAT tools, the industry fragmentation has left us in a situation where we now have 20 in active use. Licences are costly, and production teams (translators, project managers and language technology experts) can only be power users of a limited number of different translation environments. Furthermore, we deal with 117 different login scenarios to various client portals and proprietary platforms for daily file transfers and invoicing. In addition, we have wildly varying pricing models and countless client-specific LQA processes, all dictated to us, by necessity, by our translation company clients, or their clients. Having to work like this is a major hindrance for a supply chain company that strives to build a smooth, streamlined service.
I love the fact that STP collaborates with a large number of translation company clients. But when it comes to the efficiency and effectiveness of our internal operations, I wish that the consolidation in the language industry led to a simplified production environment: STP could still produce Nordic and English translations for all reputable language service companies in the world, but these companies would only work with two sophisticated translator-friendly CAT tools, use a couple of translation management systems with good API connectivity, and apply one uniform rate discount matrix.
True consolidation in the language industry should impact the entire supply chain, but it does not simply mean cutting out the middlemen – whoever they are deemed to be – and creating one open marketplace where random sole traders bid for individual jobs. Solutions like that, made in the name of transparency, are proposed by people who have limited expertise in seamless, continuous, high-quality translation production.
The speed of business depends on trust. If the trust is strong, business between two partners can grow quickly and smoothly. On the day when consolidation and transparency are genuinely extended to all the levels of our industry, STP will be able to focus internal process development much more efficiently, and offer a lean translation production machine with a lot of transparency and best practices to those clients who value it.