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On September 21st Paris-based Acolad Group announced that it would acquire Luxembourg-based Amplexor. While the firms did not disclose the terms, their deal combines the 12th- (Amplexor) and 13th-ranked (Acolad Group) companies on CSA Research’s list of 100 largest language service providers. Following the acquisition, Acolad nouveau will have a combined US$307 million based on 2019 revenue (after subtracting about US$41 million in Amplexor revenue that will not be included in the sale).

The merged LSPs will vault into the seventh position on our Top 10 list (see Figure). The two companies expect the deal to close by the end of the year – subject to review by antitrust authorities. The deal is noteworthy given the principals and their divergent visions of the language market. In this blog we raise some questions about the alignment of the two companies, and then analyze the deal on several business axes. 

When Worlds Collide: The Challenge to Acolad

Although the language market wasn’t particularly surprised by the sale of Amplexor, who bought it did surprise them. Acolad and Amplexor are at different ends of the value spectrum for language services – the former positions itself as a translation agency, while the latter pitches its global content knowledge and expertise. CSA Research expects that Acolad’s majority owner, Benjamin du Fraysseix, and new CEO, Olivier Marcheteau, will struggle to align the company’s business model with this latest big acquisition. They will need Amplexor CEO, Mark Evenepoel, and his management team to advise them on the path forward. The big question they face is - can this new management team harness a culture that promotes business integration and innovation?

By all indications, Acolad is following a plan to create an IPO-worthy translation agency within a few years – and has grown substantially since 2016 by acquiring companies with increasing amounts of revenue – first US$20 million, then 30 and 40-million – and now one with 140 million dollars. However, unlike its previous acquisitions, this newest purchase comes with a stronger brand, management, technology, and global footprint that can benefit Acolad. 

Over the coming months we’ll find out whether Acolad: 1) plans to renovate Amplexor in its own image, in the process selling or shuttering parts that don’t fit; 2) will reimagine itself and modify its go-to-IPO model to leverage the talent, infrastructure, technology, and brand that it bought with Amplexor; and 3) can integrate Amplexor with the rest of its acquisitions, a real challenge given that the previously acquired companies in Acolad’s portfolio are still in the process of developing a unified corporate culture.
As the deal progresses, we will see how Acolad will leverage the different visions and strengths represented by the companies: 

• Acolad. It has money to fund business development and a clear-eyed financial analyst’s vision of fast growth in a commodity market for translation. It sees continued growth through a growing geographic presence, multiple sales channels, and attractive pricing. However, it has been slow to fully rebrand, integrate its multiple acquisitions, invest in innovative solutions and services, and provide a unified technology foundation for the translation companies it acquires. 
   
• Amplexor. It supports enterprise global content services, develops software to support them, and provides knowledge process outsourcing (KPO) services to differentiate them. At a more sophisticated entry point in the market, it has been successful in integrating acquisitions along the way. It has a recognized brand and differentiation, an enterprise marketing and sales organization, a global footprint, a unified software foundation, experienced management, and a pool of talent in AI, MT, and translation management. Unlike Acolad, its backers didn’t endow it with funds to spare. 

Time is of the essence as clients, prospects, and employees stand on the sidelines. Amplexor clients will worry about their future working with a still-evolving translation agency. Meanwhile, retaining Amplexor’s sales, software development, operational, and marketing talent would be a challenge with any acquisition, much less a company as different as Acolad. 

On the flip side, Acolad benefits from the association – its clients in areas where Amplexor has demonstrable strength – verticals such as life science and public sector – or geographic presence – DACH, the United States, and China – will likely welcome the additional firepower that Amplexor could bring to their global businesses and content initiatives. Acolad could also decide to target the mid-size enterprise market with global content, digital marketing, and customer experience services – those could provide a strong basis for growth and innovation. 

The Financial and Business Details

Let’s review the numbers. The two companies are privately held, so the data that follows is as reported to – and verified by both Acolad and Amplexor for – CSA Research’s annual report on the language services market. Both companies have participated in our Global Market Study for years, including “2020 Rankings of Largest LSPs in the World” (Amplexor as Euroscript in 2005, and Acolad as Technicis in 2014). 

• Ownership. Acolad is majority-owned by its CEO and his family members, with minority stakes held by two private equity firms. Amplexor is a subsidiary of a German media company Rheinische Post Mediengruppe that characterizes itself as international, but “its home is and will remain in Germany. In the region. Local.” With its positioning as a globalization specialist, Amplexor sticks out like a sore thumb in its owner’s regional vision, so merging with another LSP could unleash some suppressed energy. Note that the media group excluded one business unit from the sale – a specialized content management services group in France that accounts for about US$41M in revenue, an estimated 600 employees, and a few locations.
   
• The resulting company. Based on our 2020 Global Market Study and discounting that exclusion, Acolad nouveau will have a combined US$307 million in 2019 revenue (Acolad US$167.96M + Amplexor US$139.00M), 2,050 full-time employees (800 + 1,250), and 68 locations, including some overlap (30 + 38). Their combined revenue will account for just 0.6% of the US49.6 billion language services and technology market. Whenever a deal like this happens, we hear concerns about excessive industry consolidation. After applying the Herfindahl-Hirschman Index, the classic economist’s tool to measure industry consolidation, we don’t expect any trust-breaker push-back on this deal. 
   
• Growth. Excluding acquisition, growth at the two companies has been generally in line with industry averages. This may be the time to turn on the engine of organic growth at the integrated company, upsell the existing Acolad accounts, and become a leader in enterprise global content services for both medium and large companies. 

Areas Worth Special Attention

When they sit down to consolidate the two companies, du Fraysseix and Marcheteau, advised by Evenepoel and his team, will face some tough decisions about how to integrate this large acquisition, its ongoing rebranding, technology, and other business functions as well as manage the shift in culture and leadership style that often drives employee departures. 

• Integration. Acolad grew revenue quickly over several years with acquisitions of companies with turnover of from nearly US$20 million to more than US$40 million. We would characterize the integration of its purchases as spotty, with some acquired firms still operating with apparent autonomy. The Amplexor deal dwarfs each of the preceding transactions and raises questions about which marketing, sales, operations, and technology models Acolad will choose moving forward. Given Amplexor’s content services beyond translation, more expansive global footprint, and more seasoned sales and marketing and technology expertise, it may make more sense for Acolad to integrate itself into Amplexor rather than the other way around. 
   
• Positioning. The two companies are poles apart in marketing. Acolad’s traditional LSP marketing states that, “We will help you be local everywhere,” a service it describes as “All your language needs met by a single translation agency.” Amplexor promises a 21st-century vision that provides “Global content lifecycle experts” offering “digital experience, content globalization, and global compliance” approaching the requirements for a knowledge process outsourcer (KPO) or even a global content service provider (GCSP) like CSA Research describes in “The Future of Language Services.” Along with positioning will come the question of branding – which has more cachet and global visibility, Acolad, Amplexor, or maybe even a new name? Any rebranding is risky because it can dilute the power of the current brand – but Acolad has yet to establish its place in the pantheon of greatest brands. Finally, can the management team develop a marketing and sales culture that could fuel the hyper-growth of the new company?
   
• Technology. Amplexor brings a history of software development including machine translation, translation management, and content management software. It was an early mover with statistical MT and has worked on various European Union infrastructure projects. Acolad reportedly has an internal effort to build a unifying platform to replace its collection of disparate commercial solutions such as XTRF and proprietary systems with technology it owns and can develop to its own requirements. As soon as it can, pending regulatory approval, Acolad should convene a war room with both software development teams to evaluate Amplexor’s MT expertise and translation management software solutions to replace, enhance, or merge with current systems. This may entail abandoning some efforts that made sense a year ago but will no longer if Amplexor brings better technology to the table. The danger will be if Acolad insists on hanging on to these efforts rather than ruthlessly aligning technology activities.
   
• Revenue per employee. Data from our annual Global Market Study shows that Acolad’s revenue per employee is nearly two times higher than Amplexor’s – nearly US$210,000 versus US$111,000. The difference is due to internal functions and the cost of the services they deliver. Acolad delivers translation, while Amplexor sells that same service, plus it develops software, supports digital business, and provides professional services and consulting for global content, life sciences, and other sectors. These services don’t scale with volume, thus accounting for additional people on the payroll that a simple translation LSP doesn’t need. If Acolad wants to play in the headier atmosphere of global enterprise content, it will have to work with lower margins and perhaps delay its future IPO by a year or two as it establishes a stronger business than a commodity “translation agency.”

What’s Next?

The two companies have fundamentally different approaches to the market. Acolad’s growth model – acquisition of many translation agencies – works for a commodity translation market. However, on the low end it faces the competition of lower-price rivals, continuous translation software, and MT-driven translation portals. To differentiate, it needs to actively support initiatives prefaced by “digital” – marketing, sales, support, experience – and “customer” – experience and expectations. 

While these may be premium-sounding products today, they will become part of the lexicon for any LSP operating internationally and selling to small, mid-sized, and large enterprises. Today Acolad’s higher per-employee outcomes may look like the smarter course, but their days are numbered without the ability to address these increasingly sophisticated requirements. Acolad should look more closely at what it just bought and determine what level of integration and investment it would take to create a global innovative language market leader.