The list of advisers that helped guide the £12.4m Mobeus-backed management buyout of language service provider The Translation People is a long one. Mobeus provided the debt and equity in what, according to sell-side adviser Tim Scott, was a pretty intense deal.

Scott, co-founder and MD of boutique M&A advisory firm Cleveland Scott, first met the team behind Manchester-based The Translation People in 2016, and introduced Mobeus to it back in 2018. Jasmin Schneider had just stepped up to the role of MD and at that point, Scott says, “it was difficult to demonstrate that she had the experience to lead an MBO. As a result, it was challenging to meet the value expectations of the vendors.”

The long road to the January 2023 MBO turned on Mobeus going through its old files and, as Mobeus partner Chris Price says, “looking at those deals that had got away from us over the past few years”.

Five years later, and after a multi-stream diligence process, the capabilities of management, a strong performance during and after COVID-19, and the potential for both organic and buy-and-build expansion saw the price met and the deal get over the line. “We looked at the performance over the past four years that Schneider had been in charge of the business and could see that she had successfully steered it through COVID-19 and continued to deliver growth,” says Price. “We were able to say that this is a highly valuable management team now, who have the battle scars and have managed to continue growing the business even in a very tricky period.”

Beyond the chat

Mobeus agreed a price structure and entered into a period of exclusivity in June 2022, thus avoiding a competitive situation. With the MBO in motion, and needing sector specialists, Mobeus then assembled probably the largest number of advisers it had used on a deal: “One of the questions we asked ourselves about early on was the impact of technology and artificial intelligence on the translation industry. We needed to speak to a number of very well-informed advisers,” Price says. BDO, which had done a lot of work in that tech sub-sector, was engaged.

Jason Whitworth, a corporate finance partner at BDO, says: “We had to think about the market dynamics to support Mobeus in building its investment case. What were the market drivers? What were the value drivers? It was about assessing the business proposition today versus opportunity for growth and value enhancement through the investment cycle.

“We saw the business as a high-quality service provider delivering a personalised service to a large international customer base. Our thesis was that you can build on a strong platform to broaden that service offering and grow organically, but there was also a clear opportunity for consolidation in the marketplace.”

BDO also assessed possible future targets for acquisition in a fragmented market. Price says there are about 27,000 translation language service providers globally, about 1,000 of which are companies of an appropriate size to be a target for acquisition. “There’s a significant pool of potential targets for us to go after. We’re looking for businesses making anything from a couple of hundred thousand pounds to £2m. While we were looking to make the first few acquisitions in the UK, they will also be looking to move more into the German and French markets.”

This strategy – particularly targeting companies with a specialist focus on legal, financial and pharmaceutical sectors, where precision of language is most important and resistant to an entirely AI provision – saw a primary list of 120 targets. One bolt-on is set for completion as we go to press and there are offers out on a couple more, says Price. “We’re expecting to provide a bit more finance, but the Mobeus model is usually to be the sole source of capital at the point we do the initial deal, then bring in debt finance alongside us to support the buy and build.”

Key voice

Schneider is one of the best CEOs he’s dealt with, says Scott: “Without her, the deal wouldn’t have happened.” But there’s a note of caution from Mike Hicks, founder and CEO of Catalysis, that carried out management due diligence: “Historically, it has grown incrementally rather than through acquisition. This buy-and-build strategy is a response to increased consolidation in the sector, which will place new demands on the executive team. The fact that the team has no real previous experience of making acquisitions is not unusual with private equity-backed MBO transactions. The existing management team is being invested in and any experience gaps are identified during the pre-transaction phase.”

To help with this, Mobeus brought in two veterans of PE-backed businesses, Steve Dolton and Tom Grunwald, as chair and CFO. “Mobeus will no doubt be quite involved,” says Hicks. “The chair will need to be involved in building the team, its capacity and capability. It’ll take them a year to feel fully scalable organisationally.

“This is pretty classic for what’s happened in the mid-market private equity world,” he adds. “These days, the teams tend to be entrepreneurial, but as a result often have more gaps. And so Mobeus, in this case, was asking us to help it think about development of the management team as well as the assessment of the individuals.

“Management due diligence in some sense has become a slightly unhelpful phrase,” Hicks continues. “It sounds like an audit of management capability, whereas it is actually much more about identifying what is needed, from the individuals, the team and the organisation, to enable the business to scale.

“You’ll see evolution and development of this team over the next couple of years as they transform the business from a stable-state founder-controlled company to an investor-backed business proactively building capacity and capability to grow.”

Scott sees a different dynamic: “Three years on from the original introduction to Mobeus, the owners had largely stepped back from the business, with Schneider and the senior management team successfully running it on a day-to-day basis. This demonstrated to Mobeus that the owners were no longer required.

“In a way, the owners being one foot out of the door was beginning to hold the business back,” he continues. “If they’d been 10 years younger, they’d probably have looked at making more acquisitions, but given they had one eye on an exit, they didn’t want to make that additional investment. In that respect, it’s a fantastic buy-and-build platform for Mobeus to take on.”

Revenues from the long-standing clients who value the The Translation People’s expertise are ‘sticky’, according to Scott. Financial due diligence provider Jenny Kirkham, a partner at Cortus, paints a similar picture: “The idea of buy-side diligence is always to look at everything in the most negative light possible. But ultimately this is a business that has grown really nicely. It did well both during and after COVID-19, has a good European presence, a really strong customer base and a decent translator network, which is key in this sector.

“There’s a recognition from both the business and Mobeus that there will need to be infrastructure investment to manage more customers and growth in the translator database to support the planned growth and new acquisitions. The business has a great foundation for buy and build.”