On February 10, 2020, New Zealand-headquartered language service provider (LSP) Straker Translations acquired local rival New Zealand Translation Centre Limited International (NZTC International).
Founded more than 30 years ago, NZTC International provides both interpreting and translations services to a mix of government and corporate customers in its home market and the Asia Pacific (APAC) region. According to Straker’s market announcement, the company employs 25 people across two offices in its Wellington headquarters and in Hawkes Bay, both in New Zealand.
Australia-listed Straker Translations paid an upfront consideration of NZD 0.92m for NZTC, a predominantly cash payment that also included NZD 0.1m in Straker shares. The terms of the transaction will see Straker pay an additional potential earn-out of up to NZD 0.78m, bringing the total consideration to a maximum of NZD 1.7m (USD 1.1m).
NZTC generated around NZD 4.3m in 2019 revenues, meaning Straker will pay a maximum price of 0.4x revenues if the full earn-out is achieved. This is on the low end of language industry multiples observed by Slator, which ranged between 0.41 and 5.7x revenues in 2018 and 2019. No profitability figures were provided by Straker.
Slator 2019 Language Industry M&A and Funding Report
Straker Translations CEO Grant Straker declined to comment on factors that influenced the purchase price, or to comment beyond statements provided in Straker’s market announcement.
According to the announcement, there will be no immediate change to NZTC’s management. The company’s two founders, Liz Seymour and Paul Sulzberger, will both stay on in the combined organization “until the business has been fully integrated” onto Straker’s translation management system, RAY.
NZTC is “earnings accretive” and is expected to bring “substantial upside potential” once migrated to RAY, Straker said in the announcement. The company’s most recent acquisition prior to NZTC, On Global Language Marketing, took just six months to migrate to RAY.
With muted top-line growth of 2% in the company’s third quarter 2020 (to December 31, 2019), Straker’s latest acquisitions have not yet impacted in any meaningful way on its earnings either. The company remained in the red in the nine months to December 31, 2019, with net cash outflows of USD -0.84m.
Shares in Straker (STG:ASX) are trading at AUD 1.25, 27% below the initial IPO price in October 2018. The company’s current market cap is around USD 44m.