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Moravia Reaches US$100 Million in Revenue – and Changes Ownership
Posted by Donald A. DePalma on February 16, 2015  in the following blogs: Market Data, Translation and Localization, Business Globalization
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Moravia, #15 on CSA Research’s list of the world’s largest language service and technology companies, told us last week that it booked US$100 million revenue for 2014. That’s a big leap from the US$67.7 million that the company earned in 2013, part of which CEO Tomas Kratochvil in a briefing last week largely attributed to increasing its number of large, long-term, single-supplier contracts. Besides joining the very small club of LSPs that has reached the 100-million-dollar milestone, Moravia stands out in that it did so organically – that is, by growing its own sales rather than buying other companies. 

More noteworthy on our call was the introduction of Jon Haas as Moravia’s newest board member. Haas is a Managing Director at Clarion Capital Partners, a New York-based private equity group (PEG). He told CSA Research that Clarion purchased the majority stake in Moravia by buying most of the shares of the company’s long-time owner, Katerina Janku (daughter of the founders Eva and Rudolf Forstinger) and all the shares of the minority holders. She will join Haas on Moravia’s board of directors, with the goal of applying her decades of company and industry knowledge to continue to grow the company. Clarion would not disclose financial details. 

Of late, CSA Research has advised LSPs and tech vendors on mergers and acquisitions (M&A), and worked with PEG and venture capital (VC) firms to help them understand the language market and the opportunities. We talked with Haas about Clarion and its plans for Moravia.
  • Will Clarion change Moravia’s strategy? Other than Haas and two of his colleagues joining the board and offering assistance where needed, it will be business as usual. The strategy – and the Moravia executives driving it – will remain in place. So that they have a stake in the company, Moravia’s executives have also bought into the company at the same price per share as the new investors. 

  • Where does Moravia fit in Clarion’s strategy? Haas’ investment portfolio includes business service outsourcing firms. As if reading from CSA Research’s business globalization playbook, he observed that it doesn’t make sense for companies to have internal staff for translation and localization, and that this industry will grow in importance as enterprises turn to emerging markets to generate growth. He sees opportunities for Moravia to provide marketing services and technology outsourcing to its current high-tech localization clients and in other industries. 

  • Did Clarion consider any other LSPs? On its way to buying the company, Clarion considered other LSPs but chose Moravia for the fit with its client portfolio of business service companies, revenue growth, processes, technology, and domain expertise. Haas also told us that Clarion values Moravia’s continued ownership by Janku, a member of the founding family and entrepreneur, and her interest in staying involved.

  • What is its exit strategy for the Moravian investment? According to Haas, “We don’t bias our exits when we begin the journey. We will consider a public offering if the timing is right.” Clarion will look for the best opportunity when it chooses to cash out – whether it’s an initial public offering, a sale to another company, or whatever maximizes value. 

  • Will Clarion invest in Moravia beyond buying the majority stake? “We will look for opportunities such as complementary acquisitions, technical and process improvements in Moravia’s operations, and partnerships.” Haas also noted that Clarion’s access to capital means that it can find and fund opportunities to increase shareholder – that is, its own and management – value. 

  • Bottom line, will Clarion roll up other LSPs after acquiring Moravia? Many of the VC and PEG investors that CSA Research has spoken to or advised over the last decade see an opportunity to consolidate this very fragmented industry. While he wouldn’t answer directly, Haas’ comment that the company would consider acquiring other LSPs means that option is on the table. With larger players such as TransPerfect and smaller LSPs like Ubiqus in almost constant M&A motion, we wouldn’t be surprised to see a more acquisitive Moravia emerge from this deal.
Why is this buyout interesting? Two things stand out: 
  • Investors love software, but the reality is that somebody has to assemble the pieces. Positioning themselves as disruptive forces that limit the need for human touches, translation software developers and cloud marketplaces have garnered most VC and PEG investments. Still, most companies need help executing on their complex global content strategies. Like many larger LSPs, Moravia leverages a variety of technologies but combines them with specialists focused on client solutions, automation, processes, and infrastructure. 

  • Language is becoming a core business issue. For many companies, translation shows up as a process separate from content or product development cycles. With the VC and PEG's growing realization of language as an enabler for global business growth, these services will increasingly be paired with mainstream business processes. Deals like this chip away at the barriers that have walled translation and localization off into a separate and sometimes obscure market.
VP and PEG firms are increasingly seeking CSA Research market data, proof that that they are becoming much more aware of this industry. Some view the sector as immature, fragmented, and needing consolidation. Others see the opportunity to be pioneers in globalizing their funds and returns. And all of them hope to seed growth beyond their domestic markets, both for their own investors and for other companies in their investment portfolios. 

To help investors – as well as translation and localization buyers, the media, and others interested in the sector – get a true picture of the market, be sure to complete this year’s CSA Research Global Market Survey. If you’re a language service or technology provider, take the survey and tell us what your company is doing. 


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