Shuffling to the edge – Our M&A Predictions for 2025

As we enter 2025, the mergers and acquisitions (M&A) landscape is poised for transformation, influenced by a confluence of macroeconomic factors and industry-specific dynamics. In the language services and technology sector, we expect some of these broader trends to drive strategic consolidations and investments. In 2024, I likened M&A in the language industry to a whole group of people lining up to the edge of the pool to see who is jumping in and who gets pushed.  This article delves into our anticipated M&A trends for 2025, with, of course, a particular focus on the language industry.

Economic Revival and Its Impact on M&A Activity

The global economy is showing signs of recovery, with projections indicating a resurgence in M&A activity. Factors such as declining interest rates and (potentially) increased political stability, particularly in the United States, are fostering a more conducive environment for deal-making. Notably, the return of pro-business policies is expected to reduce regulatory hurdles, further stimulating M&A transactions. See more about this on Investopedia.  In the language and adjacent industries, we would expect this impact to build through the year and if recovery continues then we can expect point upsurges in acquisitional activity during 2025.

Technological Advancements Driving Deal-Making

The rapid evolution of technology, especially in artificial intelligence (AI) and machine learning (ML), is reshaping industries and creating new opportunities for M&A. In the language sector, AI-driven solutions like neural machine translation and speech-to-speech translation, and smart interpretation platforms are becoming integral. Companies are increasingly seeking to acquire innovative tech firms to enhance their service offerings and maintain a competitive edge. In the language space, we saw market entries from companies who have created niche technology solutions both for language services use cases and interpretation with the goal of usurping the current technology status quo. This combined with “Buyer” companies looking to diversify offerings could mean next generation language technology becomes “sexy” again. 

Fragmentation in the Language Industry: A Case for More Consolidation?

The language industry remains quite splintered, with many small and mid-sized Language Service Providers (LSPs) operating globally, flux is still high, with company size classifications and expected abilities shifting quickly as companies look to defend and bridge revenue streams.  This fragmentation presents opportunities for consolidation, enabling companies to achieve economies of scale, expand service portfolios, and enter new markets. As client demands evolve towards integrated and scalable solutions, we expect M&A activity to intensify within the sector. 2024 has taught us that buyers are cautious and intensely value-focused. In 2025, we can see this shifting to  “make (the right) deals with a full helping of optimistic caution”. This coupled with a growing number of smaller business owners looking for a lifestyle change should feed consolidation further.  

Private Equity’s Growing Interest in Language Services?

Private equity firms, armed with substantial capital have been increasingly eyeing the language industry for investment opportunities (-old news we know-). The sector’s resilience and growth potential, driven by globalization and digital transformation, still make it an attractive target. Firms are particularly interested in LSPs with strong technological capabilities and diversified service offerings, anticipating robust returns on investment. We expect that diversified and focused offerings with a technology chaser will continue to be attractive lower-hanging fruit in 2025.

The Machine that goes ping and unlocking trapped value

Anyone can have a blip (in revenue and or EBITDA), how you can explain that story and move on from there is the critical picture to paint. We have seen more of these blips happen in 2024, with companies applying a whole array of recovery strategies (including what we refer to as seller incubation programs). We expect more in 2025, remember it’s probably inevitable to see this in up to 10-20% of your business, even if stickiness is high, spot it early, identify if it is an isolated or bigger phenomenon, pivot offering and kick on.  Clients that go away can often return because they later realize that some content requires more “engine training” and “human in the loop editing”. In order to realise, for example, +10% organic growth language companies will have to offer something new that appeals to existing, returning and new clients. Those new services require offerings that might not have been available before to cover a range of content types and formats. All this means there are and will be (2025) growth opportunities, and it starts with identifying where there is trapped value, and your job as a business owner is to find out where it is and how to unlock it.  

2024 was a year where inflated valuation multiple expectations still existed in the language industry, although this has softened and corrected as the year went on; likely due to mixed growth projections and AI moving off the hype-seat and more into an embedding phase. The days of 8-10X (EBITDA) for language service companies are well behind us, though well-run smaller mid-size companies with good projected growth among key customer clusters can potentially defend 4-6.5 X (EBITDA) expectations during 2025.

Cross-Border M&A: Navigating Opportunities and Challenges

Given the inherently global nature of the language industry, cross-border M&A activities are set to rise. While these transactions offer avenues for market expansion and access to diverse talent pools, they also come with challenges, including regulatory complexities and cultural integration issues. Successful navigation of these factors will be crucial for companies seeking international expansion “fast and sustainably” through M&A.

Conclusion: Strategic Positioning for 2025

The convergence of economic recovery, cheaper credit, technological innovation, and industry-specific factors is setting the stage for a dynamic M&A environment in 2025. We expect M&A activity in the language industry to also be driven by a combination of necessity and opportunity. Companies will pursue acquisitions not only to survive economic pressures but also to capitalize on growth areas like AI integration and vertical specialization. Private equity will continue to play a significant role, with well-capitalized firms leveraging their resources to shape the competitive landscape.

Let’s see who jumps into the pool and who prefers the sun loungers in 2025?

Written by:

Dave Ruane

Global Director
Client Solutions

Olga Blasco

M&A Principal Partner
Growth and Exit Strategy Solutions