Australia-listed and New Zealand-based Straker Translations (ASX: STG) acquired language service provider (LSP) On Global Language Marketing on June 14, 2019 in its second acquisition of 2019.
Back in February 2019, in its first acquisition since listing on the Sydney Stock Exchange, Straker bought COM Translations, a media and audio-visual translation company based in Madrid, for USD 0.51m. Straker’s 2018 acquisitions were also based in Europe: Management System Solutions, (Spain) and Eule Lokalisierung (Germany).
In a press release announcing the On Global deal, CEO of Straker Translations Grant Straker said the company is “focusing our acquisition strategy in markets where we already operate and have an easier pathway for integration of acquired production systems onto our RAY platform for margin gains and, where possible, consolidation benefits.”
On Global, in short, is in line with Straker’s strategy of acquiring boutique LSPs and moving them onto its translation management system in order to widen margins.
Straker paid NZD 2.25m (USD 1.47m) for On Global in a combined cash and share deal. USD 1.13m was paid from the company’s cash reserves, while USD 0.34m came in Straker shares, as Straker issued 318,830 new shares at AUD 1.54 (USD 1.06) each.
A further sum of up to USD 0.55m will be paid over the next two years as an earn-out based on revenue performance. A bonus of USD 0.11m is also up for grabs if On Global manages to outperform revenue forecasts by a significant margin.
In total, Straker could end up paying as much as USD 2.13m (or 1.1x revenue) for On Global, which generated revenues of USD 1.95m in the financial year ending March 31, 2019. Although Straker did not disclose profitability measures for On Global, the press release said the company will be “immediately EBITDA accretive.”
Based in Vitoria-Gasteiz, in Spain’s Basque country, On Global also has an office in Barcelona. Founded in 2007, On Global employs 14 people and is focused on helping companies reach new markets through services that include multilingual translation, technical writing, and website and software localization.
On Global’s Founder and Managing Director, Gonzalo Urriza, will stay on with Straker in the short-term to help with the transition before leaving the business.
Investors’ reaction to the news was muted with shares trading at AUD 1.53 (USD 1.05) as of press time.
In late May 2019, Straker reported growing revenues and narrowing losses for the financial-year 2018. 2019 will mark a crucial year for the company as it will have to prove that its strategy will eventually generate profits for shareholders.