Why leading brands acquire LSPs to accelerate international growth
In our two previous blogs we have focused on the concept of Seller Incubation, showing how, together with our partners, Lion People Global can provide customised professional services to accelerate growth within LSPs and help companies get ready for exit.
Having helped companies achieve their growth ambitions, one of the questions we will naturally get is, if we do manage to grow the company, for instance in a hot geo or in a niche market, what are their exit options and how can we facilitate them?
This question generally comes from companies that are typically below $10mn, because companies that are above that – or companies that have built a very strong offering that is a hybrid between technology and language services – those are generally already owned by investors or are seeking investors.
So this question usually comes from smaller companies and when we invite them to describe their ideal buyer profile, the answer that we get is usually a larger LSP.
According to Olga Blasco, M&A Principal Partner at Lion People Global, there is another option that is worth considering. These are companies that are not LSPs, but could benefit from the added value that an LSP can offer.
These can be large BPO-type companies like large retail, e-commerce or media groups, that can not only avail of those services themselves, but accelerate their own growth via the acquisition of an LSP.
Typically we would view these companies as being standard clients for LSPs and being large companies that can have their choice of suppliers, so why would they choose to invest in buying a LSP of their own?
“If you’re a large leading brand, outsourcing to one or several LSPs is a good solution, whether that’s large LSPs or a combination of large and small, because it takes the content transformation pain away, allows your staff to focus on the core business and it keeps all the costs related to the multilingual capacity and the go-to-market strategy as variable costs,” Olga says.
“It also means that when you’re outsourcing to LSPs, you can have several parties compete for your spend and give you very competitive offerings based on demand service.
“However, if your core business involves operating within, let’s say a large e-commerce platform and you constantly need to refresh content and push content through the pipe and everything moves very fast 24/7 and there are different teams around the world that have different amounts of content for different campaigns, then speed and agility are key.
“So if you have a good, LSP team in-house, you can guarantee top-notch service in key markets and you’re minimising the risk.
“So I can see how the acquisition of an LSP would be a really good fit for a company like the Hutt Group, for example.”
An important question that will get asked at this point is whether it is more expensive to acquire a LSP than it is to build one by hiring a new in-house team.
“You could take the build approach and I’m not saying that that’s not the right approach,” Olga says. “But if you go for an acquisition, you accelerate the curve. You accelerate the time that it takes to build a proper team that is fit for purpose and you can get the hires and the supply chain already in one go. In one move through an acquisition – you get it all.
“On top of that, you are acquiring a portfolio of clients that are suitable for cross selling and creates a lot of opportunities to accelerate revenue growth.”
If you want to know more about this area, visit Lion People Global’s website where you can watch back our M&A Talks series of videos and fill out a questionnaire that entitles you to one hour’s free consultation on getting a LSP or language tech business ready for sale.