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Small cap star Straker Translations announces earnings accretive acquisition

In morning trade the Straker Translations Ltd (ASX: STG) share price has pushed higher following the announcement of a new acquisition.

At the time of writing the translation services platform provider’s shares are up 0.5% to $1.54

What has Straker Translations acquired?

This morning Straker Translations announced that it has acquired Spanish translation company On-Global Language Marketing in a NZ$2.25 million cash and share deal.

The deal comprises NZ$1.73 million in cash (from its reserves) and NZ$520,000 in Straker shares. The latter works out to be 318,830 shares issued at A$1.54, which was the closing price applicable on the day the transaction completed. These shares will be escrowed for 12 months.

It also includes an earn-out payment of up to NZ$850,000 over two years contingent on hitting specific revenue forecasts. A further NZ$170,000 has been allocated as a bonus should On-Global significantly outperform revenue forecasts.

What is On-Global?

On-Global is a specialised language services company based in Vitoria-Gasteiz in the Basque Country and has an office in Barcelona. These two regions are among the most industrial and hi-tech areas in Europe.

It provides translation and technical writing services, transcriptions, website and software localisation, interpreting services, consultancy, and document management in a Spanish translation market estimated to be worth NZ$500 million per year.

For the 12 months to March 31, On-Global’s revenues were NZ$3 million. The deal is expected to be immediately accretive to EBITDA.

CEO Grant Straker believes On-Global is a good fit for the company.

He said: “Straker has established itself as a leading global technology driven translation services platform. The business has a clear five-point growth strategy, and an important part of that strategy is to seek out targeted acquisitions that strategically complement and accelerate our growth.”

He added: “We are focusing our acquisition strategy in markets where we already operate and have an easier pathway for integration of acquired production systems onto our RAY platform for margin gains and, where possible, consolidation benefits. On-Global is an excellent fit in terms of customers, location and people in a market we understand well and where we are established and growing strongly.”

Elsewhere in the sector today, the Altium Limited (ASX: ALU) share price and the Appen Ltd (ASX: APX) share price are both down 0.5% in early trade.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Straker Translations. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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