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This is an as-told-to essay based on a conversation with Phil Shawe, the cofounder and CEO of TransPerfect. The company, founded in 1992, has acquired nine companies since January: H2A, Technicolor Games, Apostrophe Group, Bear Down Studios, Blu Digital Group, Speech, MPC, The Mill Studios, and Unbable. The essay is edited for length and clarity.
Acquisitions have been near and dear to our strategy. TransPerfect tries to find management teams that are like-minded or have really interesting technology that fits well within our group of technologies.
We don’t approach mergers and acquisitions like a private equity firm might, which could involve buying companies, making positions redundant, and laying people off to make the unit more profitable.
If we don’t feel like the people are a good mix, we probably won’t do the deal. Here’s what I look for in an investment.
Entrepreneurs
The No. 1 thing TransPerfect is looking for is entrepreneurial management.
One reason I love working with entrepreneurs so much is that they’re able to make excellent decisions fast. They’re also willing to change course if they make a decision and later decide it wasn’t correct. I’m looking for entrepreneurs to join TransPerfect and grow their business within a division of the firm.
Our pitch to them is, “You didn’t get into this business to do back-office accounting. Let us handle all that. You go out and do what you love to do, which is take care of customers in your field, build great technology, and sell it.”
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Founders or senior executives who stay post-acquisition
We don’t love it when the founders or senior executives leave. We would rather have them join our management team.
We go into acquisitions striving to keep the vast majority of employees and repurpose them. There are people who end up leaving, but we generally try to keep the team together because that’s what we’re acquiring — the human talent and then the technology.
We don’t even call our deals acquisitions. We call everybody a merger partner.
Back in the old days, we would only consider founder-led businesses where the management stayed on. Now, after we have grown and some of the deals have grown, we are willing to consider private equity or other deals where management has left.
Companies that already use TransPerfect’s technology
If someone is running a competitor tool and we acquire them, one of the minimum things we would expect is that they change and use our tools.
Their day-to-day business won’t change, but we’re going to need to change their accounting system to be on our global system and change their language technology platform. We don’t want to use and pay for our direct competitors technology when we have a technology of our own. Our technologies are No. 1 in the market.
A sellable product
If we feel like our existing salesforce can’t sell the product no matter what, even with training or a specialized salesperson, then that might not be as attractive.
Some people acquire businesses just for revenue or logos, but we rarely pursue acquisitions just to generate revenue growth. That ends up happening for us, but it’s not a goal for us because we’re a private company. We’re not trying to show growth to anyone. We’re trying to run a great business for our customers.
Companies that diversify TransPerfect’s holdings
Acquiring another language company might not excite us unless it’s in a new market because we’re always looking to diversify our offerings and be a value-added partner to our customers.
For example, we acquired Blu Digital, a company with amazing technology for distributing film and streaming content. We also acquired MPC, a leading film VFX company that worked on “Dracula.”
Acquiring companies in different time zones also means the sun never sets on our business.
We love the fact that we have production in different time zones in the world, working on projects for customers. If they need something done in a hurry, we can do that without crushing our US staff because we have so much staff internationally.
At the end of the day, though, these are just factors that could weigh one way or the other. To be a great company, we need entrepreneurial management and preferably cool technology that solves a problem better or a problem we don’t address in our current technologies.
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