In a highly fragmented industry like the language services space, mergers and acquisitions (M&A) are common, and consolidation is a longstanding trend.  However, many of these transactions go unnoticed, especially when they involve companies outside of the list of the Top 50 global suppliers. Two Spanish language service providers (LSPs), Mondragón Lingua and Ofilingua, are recent examples of such activities.

Based in the Basque Country, Mondragón Lingua is part of a much larger business group, the MONDRAGON Corporation, which posted a total turnover of US$20 billion in 2010. Mondragón Lingua, which is already a leading LSP in the Basque region, recently expanded its reach by acquiring Madrid-based Comunicación Multilingüe (CM) in June of 2011.

“The acquired company offers many advantages, one of the most important being its portfolio of customers,” explained Adelaida Maidagan Lazkano, Managing Director, Mondragón Lingua. She cited the company’s positioning with international institutions, especially the European Parliament and the United Nations.“The acquisition will double the revenue of Mondragón Lingua’s translation and localization business,” Maidagan Lazkano pointed out, adding that the company is combining its acquisition efforts with a strategy to boost organic growth. Mondragón Lingua plans to acquire more companies in 2013, in the hopes of expanding its reach beyond the borders of Spain.

Meanwhile, Granada-based Ofilingua acquired Gestac Congresos y Viajes, a company specializing in conference interpreting. “Twenty-five years ago, Gestac opened the first doors in the field of conference interpreting to the first graduates in translation and interpreting from the University of Granada,” explains Melchor Fernández, Managing Director, Ofilingua. “Because Gestac is both an event planning company and a travel agency, we are sure that the acquisition will enable us to offer an expanded suite of services to our customers.”

Ofilingua has also been in the news lately because of the two-year government contract for police interpreting it recently won worth an estimated US$14 million (10.7 million euros). Under the contract, Ofilingua will provide interpreters for approximately 200 events each day between Spanish and more than 100 languages, including Arabic, Bulgarian, English, Hindi, Igbo, Romanian, Russian, Urdu, and Wolof. Read more.  (…)

Acquisitions and mergers are a popular strategy in the highly-fragmented language services market, and, while it all depends on finding a good match, they can be a good way to add revenue in a down economy. In fact, our research on growth factors for language service providers shows that those companies with high rates of sustained growth tend to favor acquisitions. For that reason, we expect M&A activity to continue, especially where it’s least likely to be visible – among the legions of LSPs with revenues of less than US$10 million per annum.

See: Common Sense Advisory