logo image
  • News
    • People Moves
    • Deal Wins
    • Demand Drivers
    • M&A and Funding
    • Financial Results
    • Technology
    • Academia
    • Industry News
    • Features
    • Machine Translation
    • — Divider —
    • Slator Pro
    • — Divider —
    • Press Releases
    • Sponsored Content
  • Data & Research
    • Research Reports & Pro Guides
    • Language Industry Investor Map
    • Real-Time Charts of Listed LSPs
    • Language Service Provider Index
  • Podcasts & Videos
  • Events
    • SlatorCon Remote May 2021
    • Localizing at Scale for International Growth
    • Design Thinking May 2021
    • — Divider —
    • SlatorCon Coverage
    • Other Events
  • Directory
  • RFP Center
  • Jobs
MENU
  • News
    • People Moves
    • Deal Wins
    • Demand Drivers
    • M&A and Funding
    • Financial Results
    • Technology
    • Academia
    • Industry News
    • Features
    • Machine Translation
    • — Divider —
    • Slator Pro
    • — Divider —
    • Press Releases
    • Sponsored Content
  • Data & Research
    • Research Reports & Pro Guides
    • Language Industry Investor Map
    • Real-Time Charts of Listed LSPs
    • Language Service Provider Index
  • Podcasts & Videos
  • Events
    • SlatorCon Remote May 2021
    • Localizing at Scale for International Growth
    • Design Thinking May 2021
    • — Divider —
    • SlatorCon Coverage
    • Other Events
  • Directory
  • RFP Center
  • Jobs

Register Now for SlatorCon Remote on May 13th!

  • Slator Market Intelligence
  • Slator Advertising Services
  • Slator Advisory
  • Login
Search
Generic filters
Exact matches only
Advertisement
Frontenac’s Ron Kuehl on Why Private Equity is Investing in Language Services

3 years ago

November 10, 2017

Frontenac’s Ron Kuehl on Why Private Equity is Investing in Language Services

Features ·

by Andrew Smart

On November 10, 2017

3 years ago
Features ·

by Andrew Smart

On November 10, 2017

Frontenac’s Ron Kuehl on Why Private Equity is Investing in Language Services

“We’re in a different spot than most everyone in this room who has a [language service] business,” acknowledged Ron Kuehl, Managing Director at Frontenac to the 80 senior language industry executives gather at SlatorCon New York on October 12, 2017. “But we’re choosing to join hopefully this elite group,” he continued as he shared his perspective on the language industry and why his firm is looking to invest in the industry.

The Chicago-based private equity firm focuses on the mid-market and has invested over USD 1.5bn since its inception, resulting in over 200 partnerships with founder-owned and entrepreneurial businesses across the consumer, industrial and services sectors. “We’ve had the good fortune of partnerships with many stellar people that have built their businesses over a series of decades,” said Kuehl.

The key to Frontenac’s success may be its top-down approach and trademarked “CEO1ST” methodology, which Kuehl shared with the audience. “The key elements,” advised Kuehl “are one, the incumbent leadership team, the team that is in the business today, and two, the outside executive talent that we will help to recruit to supplement that existing team. But the essence of this is that we lead with the management side of the business.”

Advertisement

Watch Ron Kuehl discuss what Frontenac is looking for in the language services industry and how M&A can help drive growth for small and medium-sized firms.

It Begins with an Investment Thesis

Within the current steady economic growth and buoyant M&A and public equity markets, Frontenac has money to put to work. However, Frontenac begins with a market-first approach, unlike some investment groups, which start with a deal and then work backwards to understand the industry and opportunity.

“Typically, and language services is no different, it’s about good people, it’s about solid execution and it’s about a client experience that is differentiated and accommodating.”

“Over the course of any given year,” shared Kuehl, “we evaluate over a hundred different industries, market segments, investment thesis ideas. This [language services] is one that we have found compelling.” Kuehl would later list his specific reasons including:

  • Language services is a growth market where globalization is a key driver that will continue at a high rate;
  • It’s an important service where the cost of failure or mistake can be critical, particularly in highly regulated industries like life sciences;
  • There are numerous end-markets and various service offerings providing multiple attractive entry points for Frontenac as a new investor; and
  • It’s a fragmented industry with acquisition-led growth opportunities to accelerate organic growth.

Frontenac has now developed a detailed investment thesis for language services, with a long-term strategic growth plan, technical steps to achieve a successful outcome, and people central to their investment plan.

“Rarely are we buying the best widget manufacturer or some IP-protected business,” said Kuehl as he shared a sampling of current investments. “Typically, and language services is no different, it’s about good people, it’s about solid execution and it’s about a client experience that is differentiated and accommodating.”

The CEO1st Approach

Frontenac works with a CEO1ST partner throughout the process from investment thesis development through eventual liquidity. For language services, they are working with Perry Solomon, who has two decades of CEO experience, worked with multiple private equity firms during that time and deployed multiple playbooks in different industries, including language services.

Ideally, Frontenac is looking for a language service provider (LSP) of reasonable size with a differentiated business model, sufficient immediate infrastructure, and stable and growing cash flows. “Revenue matters,” advised Kuehl “but for most of us [in private equity], it is about cash flow and I think about stability of cash flow and growth of cash flow. Those are two meaningful ways to think about a business. The best businesses have both stability and growth of cash flow.”

“Revenue matters but for most of us [in private equity], it is about cash flow and I think about stability of cash flow and growth of cash flow”

In terms of overall attractiveness, size, cash flow momentum, uniqueness, diversity, lack of business concentration, and existing management commitment all matter to Frontenac. Once a company is identified, Frontenac, the CEO1ST partner, and incumbent management get together to brainstorm how best to drive value creation going forward.

It’s a highly flexible approach with the existing management team central to the process. “They know the business best,” said Kuehl. “They know the industry and oftentimes are sitting on latent ideas that haven’t been executed on yet for one reason or another.” Frontenac marries this with CEO1ST executive, who has industry knowledge and can bring some new and unique ways of operating.

How that works depends on the business. “Perry could be a board member, a chairman, an executive,’ added Kuehl. “What are the needs are of the company and the desires of the ownership and of the management team?”

Frontenac also make use of outside advisors who are specialists in functional areas and can add value in discrete parts of the business like sales compensation models or reducing working capital.

M&A is Case Specific

In concluding his overview of their investment approach, Kuehl summarized that they are looking to ride the industry’s growth, help a successful LSP expand and diversify its business, and utilize acquisitions to further support growth.

“It’s specific to the strategy and what the objectives are and what opportunity exist in the marketplace,” advised Kuehl. “Yet with 20,000 different players in language services, it likely makes sense to do at least a couple of acquisitions during the course of a five- or 10-year period.”

For LSPs looking for growth capital, Kuehl advised reassuringly, “If you build your business smartly and build it right, invest in people, don’t cut corners and build for the long term, you’ll be highly sought after and you’ll have a business that many different people want and want at a premium valuation.”

SlatorCon Zurich

Join us at SlatorCon Zurich on December 5, 2017 for additional insights into M&A within the language services industry by Dr Christoph Bier, Managing Partner, Kurmann Partners. Kurmann Partners were the exclusive advisor to LUZ Inc in their USD 82.5m sale to RWS Group in February 2017.

To download a copy of Ron Kuehl’s presentation, register free of charge for a Slator membership.

Private Equity in Language Services

3 MB

DOWNLOAD

TAGS

FrontenacM&Aprivate equityRon KuehlSlatorConSlatorCon New York
SHARE
Andrew Smart

By Andrew Smart

Co-Founder of Slator. Financier, entrepreneur, commercial director. Building businesses one new client at a time.

Advertisement

SUBSCRIBE TO THE SLATOR WEEKLY

Language Industry Intelligence
In Your Inbox. Every Friday

SUBSCRIBE

SlatorSweepSlatorPro
ResearchRFP CENTER

PUBLISH

PRESS RELEASEDIRECTORY LISTING
JOB ADEVENT LISTING

Bespoke advisory including speaking, briefings and M&A

SLATOR ADVISORY
Advertisement

Featured Reports

See all
Pro Guide: Translation Pricing and Procurement

Pro Guide: Translation Pricing and Procurement

by Slator

Slator 2020 Language Industry M&A and Funding Report

Slator 2020 Language Industry M&A and Funding Report

by Slator

Slator 2021 Data-for-AI Market Report

Slator 2021 Data-for-AI Market Report

by Slator

Slator 2020 Medtech Translation and Localization Report

Slator 2020 Medtech Translation and Localization Report

by Slator

Press Releases

See all
Protranslate Continues its Substantial Growth in 2021 with its New Enterprise Services

Protranslate Continues its Substantial Growth in 2021 with its New Enterprise Services

by Protranslate

lexiQA Celebrating 5 Years of Continuous Growth

lexiQA Celebrating 5 Years of Continuous Growth

by lexiQA

GET IT Consolidates its Agreement with XTRF to Foster Growth and Ensure Business Excellence

GET IT Consolidates its Agreement with XTRF to Foster Growth and Ensure Business Excellence

by XTRF

Upcoming Events

See All
  1. SlatorCon Remote May 2021

    by Slator

    · May 13 @ 3:00 pm - 8:00 pm

    A rich online conference which brings together our research and network of industry leaders.

    More info $110

Featured Companies

See all
Sunyu Transphere

Sunyu Transphere

Text United

Text United

Memsource

Memsource

Wordbank

Wordbank

Protranslating

Protranslating

SeproTec

SeproTec

Versacom

Versacom

Smartling

Smartling

XTM International

XTM International

Translators without Borders

Translators without Borders

STAR Group

STAR Group

memoQ Translation Technologies

memoQ Translation Technologies

Advertisement

SlatorPod: The Weekly Language Industry Podcast

connect with us

footer logo

Slator makes business sense of the language services and technology market.

Our Company

  • Support
  • About us
  • Terms & Conditions
  • Privacy Policy

Subscribe to the Slator Weekly

Language Industry Intelligence
In Your Inbox. Every Friday

© 2021 Slator. All rights reserved.

Sign up to the Slator Weekly

Join over 13,800 subscribers and get the latest language industry intelligence every Friday

Your information will never be shared with third parties. No Spam.