Before Lionbridge disappears into the anonymity of private ownership, let us take one last trip to the smorgasbord of information that are the Security and Exchange Commission’s disclosure requirements.

In a 200-plus-page proxy statement filed with the exchange inviting shareholders to approve its acquisition by private equity firm H.I.G, Lionbridge provides a blow-by-blow account of how the sale came about and how H.I.G emerged as the winning bidder.

As Lionbridge CEO Rory Cowan told Slator in our exclusive interview following the announcement of the sale in December 2016, discussions around putting the company up for sale began just over a year ago.

Strategic Buyers Approach

According to the SEC filing, it was, in fact, two requests by strategic buyers in late 2015 that triggered the process. “Strategic buyers” refers to other language service providers or corporations interested in an acquisition for strategic reasons, as opposed to pure financial investors like private equity firms.

The filing says inquiries by the two strategics were the result of “certain market opportunities arising as a result of recent merger and acquisition activity in the translation and interpretation services industry.”

On December 17, 2015, Lionbridge signed a confidentiality agreement with one of the strategic buyers, which the filing refers to as Party X. In a January 28–29, 2016 meeting, the Lionbridge Board of Directors discussed M&A activity in the industry and the challenges the company faces, including its ability to fund acquisitions. At the same meeting, the board gave management the green light to continue discussions with parties interested in a transaction. On February 5, 2016, a confidentiality agreement was signed with the second strategic buyer, Party Y.

Discussions with the two strategic buyers were short-lived, however, and the talks terminated in early February with strategic buyer X and in mid-March with strategic buyer Y. Enter H.I.G and a second financial investor referred to as Party A, which approached Lionbridge in the first quarter 2016 and, by early April 2016, were officially in the running.

By end-June 2016, another financial investor (Party B) joined the process — but quickly pulled out after initial meetings showed that Lionbridge was not aligned with the stage of company in which they typically invest.

Inadequate Bid

In early July, the Lionbridge board rejected H.I.G.’s opening bid of USD 5.50 per share as “not adequately valuing the company,” and declined to grant H.I.G. exclusivity in the process. Following the bid, the board retained investment bank Union Square as its financial adviser and formed a Special Committee composed of “independent and disinterested directors” to manage the process and make recommendations to the full board.

Around the same time, two additional financial investors (Parties C and D) approached Lionbridge expressing an interest in joining the process. In the weeks that followed, Union Square brought two additional potential financial investors (Parties E and F) to the table.

After financial investor C abandoned the bidding in early August, Lionbridge gave the remaining five bidders until August 18, 2016 to make an acquisition proposal. The board had previously considered broadening the field, but felt the risk of leaks and of having to disclose sensitive information to competitors outweighed the benefits of a more competitive process.

As the deadline loomed, financial investors A, E, and F abandoned the process for reasons ranging from not being able to “offer a meaningful premium” or “make a competitive proposal” to not believing they could be “an aggressive bidder.”

This left Lionbridge with H.I.G, which submitted a bid of USD 5.60 per share and financial investor D, which indicated interest at USD 6.07 per share. Lionbridge then opened its virtual data room and the two parties commenced due diligence.

After some back-and-forth with both parties (H.I.G increased its bid to USD 5.70), Lionbridge’s third-quarter results became a cause for concern to both potential buyers. Both requested additional information about the quarter and about Lionbridge’s outlook before revising or confirming their bids.

Firm and Final Bid

Afraid progress was going to slow to a crawl and with precious management attention drained, the Lionbridge board informed the two bidders on October 28, 2016 that unless a final bid was forthcoming, the sales process would be terminated and access to the virtual data room shut down. The move took out financial investor D, which expressed concerns over the volatility of the business and declined to submit a formal revised offer.

After a few presumably tense days, H.I.G. called CEO Rory Cowan on November 2, 2016 to inform him a final bid would be forthcoming the following week. The next few weeks saw some horse trading as the Lionbridge board asked for USD 5.90 per share in exchange for exclusivity; but eventually settled for USD 5.75 in exchange for H.I.G. agreeing to a 45-day so-called go-shop period.

Finally, on December 12, 2016, the deal was announced at USD 5.75 per share, or USD 360m before the markets opened.

In retrospect, what is striking about the way the deal unfolded is the early exit (and general lack) of strategic buyers. It can be taken as an indication that ownership and top management at leading LSPs consider mega-mergers in the language services industry as difficult to pull off — and post-merger integration, risky. The odds of a strategic buyer emerging as the winning bidder for TransPerfect — should it actually come to auction this year — are now lower than they already were.