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Why language services group RWS could be the latest private equity victim
Language services and technology company RWS (RWS:AIM) has attracted private equity interest following the announcement (21 Apr) Baring Private Equity Asia fund was considering making an offer for the company.
Under stock exchange rules the private equity fund has until the close of play on 19 May 2022 to make a firm offer or walk away. RWS confirmed no approach has yet been made.
The shares have gained around 25% since the announcement with news of a slightly better than expected first half performance adding to the recent momentum.
However, on a 12-month view the shares have halved from over 700p, so it perhaps not surprising the business has attracted some predatory interest.
Davy points out that most of the language services market is already in private equity hands, leaving RWS the only quoted player following its acquisition of peer SDL in November 2020, which created the world’s largest translation company.
The disappointing synergies gleaned from the supposedly transformational deal and the departure of chief executive Richard Thompson who had masterminded the group’s growth in the last few years, weighed on the shares.
The cash flow generative nature of the business which has high operating margins and low capital expenditures make it a good fit for private equity players.