There is one magic number that carries the value of your LSP, and it’s not the revenue. In M&A, we are looking at your profitability and EBITDA (Earnings before Income Tax, Depreciation, and Amortization). To this day, many LSPs don’t include EBITDA in their financial reporting, especially LSPs from abroad. Although this is the magic number we’re looking for as it will be multiplied, depending on your revenue, and it will determine the sales price at the end. If you don’t have it in your financial reporting yet, please consider including it.
Oh, yes, it does. The higher the percentage of your direct clients, the more attractive you are to buyers. If you are providing mainly services to other MLV’s, consider finding local and direct clients to level this out. The higher the percentage of MLV clients, the higher the risk for the buyer of losing clients right from the start, that’s why they are usually not interested in pursuing.
But not all is lost, there might still be a way that you find a buyer if most of your revenue comes from working for other MLVs. If your revenue is in the millions with an EBITDA of 15-20%, we can contact PE (private equity) buyers. The localization industry is a steady, growing market and PE buyers are usually open to enter growing markets.
According to Slator (Language Industry Intelligence), 88 % of all M&A deals in the industry are LSPs buying other LSPs, and the rest are either Private Equity, IPOs, or non-industry buyers.
Having direct clients with a great mix that none of either of them account for more than 25 % of the revenue.
Diversify or specialize, offer trendy services and/or technology. Have clients in the upcoming markets like i.e., in the gaming industry.
Have your finances in order and show increasing EBITDA over the past 3-5 years.
If you have questions or would like to schedule a call, please reach out to:
Dee Johnson, LSP Matchmaker at Language Transactions
(e) djohnson@languagetransactions.com
(p) +1 678-387-0526
(Skype) djohnson245
www.languagetransactions.com