Capita’s latest acquisition is an intriguing one that takes it into a new market area and has overtones of international expansion.
The company is purchasing translation and interpreting provider Applied Language Solutions (ALS) for £ 7.5m (cash-free and debt-free as is the norm for Capita). Financially it is in line with Captia’s ‘usual’ acquisitions which tend to be small bolt on purchases (see Capita buys Police HR software from ACS). ALS made a pro forma operating loss for the year ending May 2011 of £0.3m on revenue of £10.6m.
A further consideration of up to £60m is possible over the next four years, dependent on profit performance. This includes meeting growth targets relating to roll-outs around the attractive framework agreement ALS has with the Ministry of Justice and its partners, and greater penetration of the UK language services market.
The acquisition marks Capita’s entry into a new sector and the MOJ agreement provides a meaningful entry point. Capita is also acquiring a large skilled and international workforce - ALS has 17,000 translators from across the globe on its contractor book – and this could be the prime reason behind the acquisition. The size of the workforce and its international nature suggests Capita is looking for growth outside the UK which would be a significant move.
Capita’s new direction could spell bad news for UK HQ’d translation and web content management provider SDL however who is also looking for expansion (see SDL circling troubled Alterian).
TechMarketView’s BPS expert John O’Brien will provide further analysis of Capita’s latest move after the holiday season.