July 17, 2018

IPO-hopeful Straker Translations scoops up German company

Via NBR.co.nz

By Calida Stuart-Menteath

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Auckland-based Straker Translations has made another acquisition as it expands its global reach.

The technology company, which provides online translator services, has scooped up German translation firm Eule Lokalisierung, which has offices in Kiel and Cologne.

Eule (pronounced Oiler), was founded in 2005 by Jörgen Danielsen, who will remain with the company in a management role after the acquisition. The price paid for the business was not disclosed.

The German company has 23 staff and will merge with Straker’s European operations. It is profitable with revenues “in the low-to-mid millions,” with the acquisition funded from Straker’s balance sheet, chief executive Grant Straker says.

Germany is Europe’s largest translation market, and Straker already has a presence there with several blue-chip Germany companies as customers, he says.

“We wanted to build our physical presence in that market and acquisition was for us the right way to do that.”

This acquisition will give Straker 68 fulltime employees in Europe and more than 120 spread across offices in nine countries.

Straker doesn’t employ any translators but uses artificial intelligence and human crowdsourcing through its RAY translation platform to provide translation services to corporations.

This is Straker’s fourth acquisition of another translation company in the past 18 months, after buying Eurotext (Dublin) in late 2016, Elanex (San Francisco) in 2017 and MSS (Barcelona) earlier this year.

The companies switch to Straker’s platform to be more efficient and profitable post-integration, says Mr Straker, who co-founded the company in 1999 with his wife Merryn.

While there were some challenges integrating the first couple of acquisitions – “getting the systems and processes right” – the company spent some months building technology, which streamlines integration into its platform.

“There was a huge amount of work we did to align our platform with the way these translation agencies operate …It’s something you have to get right when you have staff all around the world.”

Acquisition a key strategy

Acquisition forms a key part of the company’s global growth and Mr Straker expects to continue at around the same pace as it finds the “right size” company.

“It really depends. We’ll get the last two done and dusted. But certainly, acquisition is something we’re very focused on.”

The translation industry is a $US43 billion industry and is expected to grow at 9% a year to 2022.

It’s a fragmented market with about 20,000 players, most sitting somewhere between $1-3m in revenue.

Many have a core group of about five major customers with whom they’ve had long-term relationships, which lends itself well to the acquisition model, Mr Straker says.

“Basically by buying the company we get those relationships and get a geographical footprint.”

While Straker is scooping up some competition in the markets it wants to operate in, the company is “far ahead” of others in meshing machine learning and humans, he says.

“If we go back seven years when we first started doing it, everybody thought we were crazy. Yet now everybody can see that’s the way things are going. That gives us a pretty strong competitive advantage.”

The company, which has annual revenue of more than $20m and expects to be profitable this year, is seeing strong organic growth in all its markets except for the UK, which Mr Straker puts down to Brexit turmoil.

Straker has signalled an initial public offer is on the cards but has not set a date or decided on the exchange.

“It’s something we’re getting advice on and we’re certainly keen to go down that track at some point. We’ve got a healthy balance sheet, some really good growth and some profitability coming, so we’re happy to keep doing what we’re doing at the moment,” Mr Straker says.

Ex-All Black captain David Kirk is a 20.4% shareholder through his company, Bailador. The Strakers own 18.2%.