Private Equity, The Translation Industry & Lionbridge

Too Long; Didn't Read

Lionbridge has recently been <a href="http://www.commonsenseadvisory.com/default.aspx?Contenttype=ArticleDetAD&amp;tabID=63&amp;Aid=37868&amp;moduleId=390" target="_blank">in the news</a> as the story of their <a href="http://www.lionbridge.com/lionbridge-enters-definitive-agreement-acquired-hig-capital/" target="_blank">“agreement”</a> to be acquired by H.I.G. Capital spread. I thought it would be useful to examine more closely what Private Equity is, and what they do since I found much of the commentary on the Lionbridge deal unclear, unsatisfying and quite unlikely to be accurate as they seem to overlook why PE gets involved at all. I thought that while I am at it, let me also add Luigi’s opinion which is also not a translation industry mainstream opinion, to provide alternate perspectives to the ones we have been hearing.<br>&nbsp;<br>&nbsp;From my early business career when I worked close to Wall St. and institutional investment, private equity meant firms like Kohlberg Kravis Roberts, The Blackstone Group, and Apollo Global Management. They were often called corporate raiders, and, in fact, they made a movie about a PE raider, called <a href="https://en.wikipedia.org/wiki/Wall_Street_%281987_film%29" target="_blank">Wall Street</a>, where Hollywood <a href="https://en.wikipedia.org/wiki/Gordon_Gekko" target="_blank">made PE rock stars</a> like Gordon Gekko, look bad, and suggested he/they lived by an ethos that “greed is good”, destroying companies to extract a few million dollars to buy a private yacht. Maybe that was an exaggeration, but it is true, that PE generally went into companies that they felt were undervalued or under-performing and went in and “cleaned up and improved the situation”. They showed them “how to do it right” as Frank Zappa would say. In fact, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1342522" target="_blank">there is research</a> that suggests that private equity investors are corporate doctors. Perhaps things have changed since the 90’s, and now Private Equity is a much more friendly and fluffy experience, but my ample gut tells me that generally <strong>investors want to make money, and they don’t acquire assets to get a board seat and hang out with the management. They generally want change that results in them making MORE money.</strong><br>&nbsp;<br>&nbsp;An informative <a href="http://www.hbs.edu/faculty/Publication%20Files/15-081_9baffe73-8ec2-404f-9d62-ee0d825ca5b5.pdf" target="_blank">Harvard Business School draft paper</a> provides some insight on the whole Private Equity view of the world. Given that they base their observations on a study of 79 PEGs (Private Equity Groups) with $750B under management suggests to me that there could be some truth here. Top Private Equity Companies <a href="http://ln.is/com/tQ6QL" target="_blank">are listed here</a> HIG Capital who acquired LIOX is #70 in this list.