Good morning. Welcome to the RWS and SDL webinar. All attendees are in listen-only mode. At the end of the presentation, there will be the opportunity to ask questions. There's a PDF of the slides on the right-hand side, and this webinar is being recorded. I now hand over to Andrew Brode, Executive Chairman, and Richard Thompson, CEO of RWS, and David Clayton, Chairman, SDL. Andrew, over to you.
Good morning, everybody. Richard and David and I are very pleased to have this opportunity to present what we believe is a highly significant development in the language service provision world, because the combination of RWS and SDL will create the world's leading language services and technology group. If I could see the first slide, and the next one. This summarizes the key financial parts of the transaction. It is an all-share for SDL. The ratio being 70.5% for the ongoing RWS shareholders of the combined entity, 29% for SDL. An offer price, therefore, of 907 pence, an approximate offer equity value of GBP 854 million, and a premium of just over 50%. Next slide, please. We believe that there are a number of compelling reasons for this combination. RWS has built its reputation as a specialist technical language services provider in the intellectual property, life sciences, and technology space.
Whilst SDL comes much more from a technology background, and we believe its language technology expertise is market leading in the LSP world. Our customers, the joint customer base, will have a much wider proposition, and we're expecting to drive up the combined margins, and to create revenue synergies from the hugely increased number of customers we bring to the party and cross-sell and upsell. The position of the group in life sciences will be very strongly enhanced. We will be very close to the market leader in that space. We're already the leader in the large enterprise technology space, particularly on the West Coast with the FAANGs of Microsoft. For the purposes of this combination, we are allowed to indicate that we see at least GBP 15 million of cost synergies signed off by our financial advisors.
We believe there are significantly more than that available. At this stage, the Takeover Panel doesn't allow us to identify those to you. We think we'll have attractive margins, highly cash generative, a very strong balance sheet, and we will have net cash as we go in at completion. We will have the strongest platform in the industry, we believe, from which to invest in other inorganic growth opportunities and of course, our organic business. We believe that the combination will result in double-digit earnings in the first financial year post-completion. Next slide, please. This summarizes for you why we believe we are going to be the world's leading technology and language services group. Our combined 2019 revenues were GBP 732 million. The closest competitor sits at about just over GBP 600 million currently, whereas these are the 2019 numbers that you're looking at.
We will have adjusted PBT last year of over GBP 100 million, GBP 109 million. Cash inflow of GBP 111 million. We will have close to 7,000 employees as we move forward as a combined group. Next slide, please. Governance is very important to us and is becoming increasingly important for listed companies, or indeed for private companies. For listed companies in particular. I am wanting to use this opportunity in the combination of creating as an independent board as we can do. I will be continuing as the Executive Chairman of RWS. Richard will be the group CEO. Des Glass will be the group CFO. The present Senior Independent Director of RWS, David Shrimpton, will not seek re-election at our next AGM. He will stand down.
He'll be succeeded by Lara Boro, the Chief Executive of The Economist Group, who's been an NED on our board for two years plus now. David, who is on this call, will be invited to join as a non-executive director, and SDL will supply one further non-executive director. Who that is yet to be confirmed. Outside of that group, our key executives will be Joe Lugo on our side. He's the Chief Operating Officer of the RWS Group at present. Azad Ootam, a highly talented technical guru. He will become the group CTO, and will have responsibility, as you'll hear from Richard, for our entire IT platform going forward.
We will continue to prioritize our ESG agenda, and we believe that both companies operate in a style which should put us well up in the top quartile of companies in terms of their compliance with the ever more important ESG agenda. Could I have the next slide, please? RWS floated in 2003 and has had a consistent progressive dividend policy, as you can see on the left-hand slide. We intend to maintain that progressive dividend policy, and we expect that to be of benefit to the SDL shareholders who stay with us once this deal completes. With that, can we move on to the next slide as I hand over to my Chief Executive Officer, Richard.
Good morning. Thank you, Andrew. Hopefully you can all see me. It's always a bit of a scary situation when you're clicking buttons midway through a presentation. Hopefully over the next couple of slides, I'll be able to explain to you why we're so excited about this transaction, and particularly the three old men that you've got in. Well, it takes quite a lot to get us three old men that you've got presenting to you today excited, but I think this transaction does. The reason that it does is because what it's doing is bringing together the best bits of the language services market in that you're putting together SDL's world-leading superb tech with language tech with RWS's language services. It fits like a kind of sort of a bit of a jigsaw.
That's becoming increasingly important in a market that's evolving and developing and growing such that technology needs to be an increasing part of your offering, particularly with concerns about data security, et cetera. By bringing these two bits together, what do we do? We're going to be utilizing more of SDL's technology, using their Helix operating platform and putting more work down that platform, as we'll hear in a minute. This transaction, as Andrew says, enhances the customer proposition, gives us a greater geographic footprint, gives us greater services that we can offer to our clients in a more secure and streamlined manner. This combination creates a business, a world leader, two British companies, two PLCs coming together to create a world leader in language services and language tech, with sales just shy of GBP 1 billion in a market of GBP 57 billion that's growing rapidly.
It's a real good success story. The key here is clearly SDL's technology and their vision. What we want to do is we want to carry on the work that they've done over the past two years. That's why that excuse me, the Azad Ootam appointment as the group CTO is so important. Those of you who know RWS will know that we run a divisional structure with three divisions, namely patent translations, life science translations, and other services, and also Moravia, who do translations for the tech giants, plus some other companies where we're looking for translation and localization.
What we're going to be doing is we're going to be creating a group CTO role that sits across all of those businesses and all of SDL's businesses, and we're going to move the IT functions from each of our three divisions and have them reporting directly into Azad, creating a CTO role and a CTO structure, tech structure, which allows us to streamline, simplify and improve, and probably accelerate and enhance the way that SDL has been going over the last few years. If I skip over a schedule, because I should have said that to begin with, and move over from this schedule to the next one. I think I've already covered that one because I forgot to tell you to move the slides. This is better because it's a substantially bigger group. What will it allow us to do?
Well, it will allow us to improve the customer service, obviously, it'll increase revenue opportunities because we're going to have a much larger sales team, better geographic coverage, and wider product offerings. I touched on the product offerings already, I'll just do it again here. We will be able to offer patent translations to SDL's customers because they don't specialize in that area. We have within RWS a service called Linguistic Validation, which helps our life sciences customers prove their marketing claims about a drug or about a treatment. That's something else we can offer to SDL's life sciences and clinical research organization customers. The fact that SDL have their own in-house machine translation and neural machine translation offering means that we can sell that the other way into RWS's customers.
Those of you've heard me talk before about how we're wanting to accelerate the rollout of neural machine translation within our life sciences sector initially, and then also moving it on to IP services at a bit of a later date. This actually accelerates that process significantly. Finally, SDL's got other businesses. They have a language tech business and a language content business. There's an opportunity to sell their content business, which is Tridion, and it's to do with websites and make sure our websites are constantly updated with fresh content and also in the right languages at the right time with the right localization, et cetera. There's an opportunity for us to actually sell those services into RWS's existing customer base.
The other thing that we see from this deal is that because of the increasing technical complexities of RFPs, the fact that SDL have got this experience in tech and also got the whole library of connectors, et cetera, makes it much easier a selling process. Further out, we see improvements, opportunities to improve the margin. SDL have done a really good job in integrating Donnelley into their systems and have improved margins as a result of that.
We think that by moving certain parts of the RWS business onto the Helix platform, we'll see similar margin improvements. Finally, I think I would say that the recent launch of SLATE, which is effectively an in-house machine translation product by SDL, is really exciting for us because we are getting increasing number of inquiries from customers and non-customers about whether we offer a product that people can take in-house, use it themselves for machine translation. We see that as a way of getting into new customers, primarily, in that they will buy SLATE, and we can upsell from that offering. If I move on to the next slide, which shows you the geographic footprint of the two businesses. You can look at the schedule in two ways, really.
I could say to you that with that many offices, we can improve our customer service because we're much closer to the customer, which is true. We can, obviously. Again, you can flip that around and say, "Actually, there's a lot of offices there." I think SDL have already recognized this and have announced the fact that they're rationalizing and reviewing the number of offices that we've got, and they've announced a cost-saving figure. That's great, and we will support that program of office rationalization. I think in a post-COVID world, I think many companies, including SDL and RWS, are realizing that they don't need as much office space as they did before. RWS will support that program and look to accelerate it.
Just to be clear, when we move on in the next slide or two into the cost synergies, we have not taken any financial benefit from that rationalization program, either the stuff that SDL has announced or our further accelerated plans. We have not included anything of that into our GBP 15 million cost synergies that I'll come onto. Undoubtedly, there is an opportunity here to rationalize our office structure. If we move on to the next slide. Yeah. Andrew touched on this. If you're going to focus on two sectors going forward in a post-COVID world, I think life sciences and technology are the ones to focus in on. That's what we're doing as part of this integration structure.
As we're proposing it at the moment, clearly, with the two PLCs, limited amount of due diligence you can do, limited amount of work that you can actually find out about the other side. Certainly, the way we're looking at it at the moment is that we will move part of our life sciences business onto their Helix operating platform because they've shown that with Donnelley, they can improve gross margins. Similarly, we will move part of the Moravia general translation business again onto their Helix operating platform, because again, we think that will improve margins. Likewise, we're going to move SDL's larger enterprise clients that they have, they have several of those. We're going to move those onto the Moravia platform, streamlining our operations, streamlining our platforms, improving margins, improving efficiencies. If I move on to the next schedule.
Yeah, this is the synergies that we've got. Pricewaterhouse do a thorough, I would say, job of identifying what a synergy is, and they're quite prescriptive, and I guess both sides are quite nervous about getting the numbers wrong. We started out with a much bigger number than GBP 15 million on the cost synergies or the opportunity to reduce costs. Pricewaterhouse take the view that it's got to be a pure synergy. There's got to be a definite overlap. There's got to be a definite reason for that combination leading to that reduction rather than an intention to do something differently by RWS. There's a much bigger number behind that GBP 15 million that then gets whittled down to what is a pure synergy, and then Pricewaterhouse whittled it down even further.
They discount it by how much they think you can actually deliver on. The GBP 15 million is underpinned by a safety bucket, if you like. The second thing that underpins it is that we've done this before. RWS has done it numerous times in terms of acquisitions and integrations and cost reductions. We'll see that on the following slide. Where does the GBP 15 million come from? It comes from four buckets there. Because we're two PLCs, clearly, there is an opportunity to reduce PLC costs, and that's the top 40%, that GBP 6 million. That's the board costs, it's the board support cost, it's a number of group functions that would go because of the overlap there. Second area where we think there is some cost synergies is on the sales and marketing.
SDL has a large number of sales and pre-sales and marketing people who are doing a great job. Clearly, with the combination of the two businesses, there's an opportunity there to review where we do have salespeople, where in regions and what they do and how they do it, and there's an opportunity there. Plus, marketing, we can rationalize that. That's the second bucket of GBP 6 million, the second 40%. The certain third-party spends. RWS already uses SDL's technology. We pay for it because it's world-leading. We use it in terms of translation memory, and we also use it to a limited degree in terms of machine translation. We don't use it all the way through our divisions. For example, Moravia don't use SDL's technology at all.
By extending it over Moravia, that means there are third-party license costs that we incur currently, which we won't be incurring going forward. That's the 15% you see in the third bucket. Finally, on the fourth bucket that we've got there. As a result of moving businesses around, moving our life sciences piece across from where it is at the moment in the RWS Life Science division, moving that across to Helix. Similarly with the Moravia tail, looking to move that across. There will be efficiencies. Efficiencies of scale, efficiencies of simplification, et cetera. That's the third bucket of about GBP 750K at the bottom there. Those four buckets tot up to the GBP 15 million that we believe we can deliver. As a result of that, taking that into account, we get significant double digits.
Sorry, double-digit earnings accretion. If I move then on to the next page. Excuse me. You can tell it's early in the morning, can't you? What we get here, the chart on the right-hand side shows you the relative size of the businesses and the relative contributions to sales and adjusted operating profit, with sales of GBP 732 million, just shy of $1 billion. I think an operating profit of just over GBP 116. You can also see the margin of 15%. That's pre any synergies. If we took the GBP 15 million synergy on top of that, gets you at about 18%.
We do think because of the changes that we aren't allowed to describe and aren't allowed to give you because of Takeover Panel and because I've got my chairman and soon to be a non-exec director on this RWS board, I'm not going to give you the number, but there are numbers that mean that we can drive that 15%-18%, definitely, and then we believe we can get beyond that as well. I think, where would that improvement come from? Well, I've touched on some of these already. It comes from better utilization of SDL's tech, which isn't in the synergy number. It comes from reduction in other overheads, which isn't in the synergy number. Also it comes from the cross-selling, the revenue synergies that we've got here that I touched on earlier on.
Cross-selling the patent translations, cross-selling our linguistic validation to life sciences customers, cross-selling the machine translation services into our high- tech customers that we have currently. Also looking at the ways that we can sell their SDL's content services, language content, their marketing website business, et cetera, into our customer base. I'm always cautious about revenue synergies. Everybody's heard me before says they take a long time to deliver, and I'm an accountant by training, so I'm always prudent on these things. Undoubtedly, the opportunity is there, and we need to deliver on it. If we move to slide 15, what we can see there, it really sort of maps out the history of acquisitions within RWS and SDL. The business, the key point to note is that business is highly cash generative. I think everybody on this call probably knows that.
We have very low CapEx requirements. As a result, we generate an awful lot of cash and over GBP 100 million pro forma cash for FY 2019. We haven't put any debt into this transaction. That's because, well, one, because we didn't need to. We think that a share transaction, all share transaction is the best for both sets of shareholders. It allows both sets of shareholders to continue in the growth of this combined entity, carry on in terms of not only organic growth but also acquisitive growth. We kept our powder dry. Not that we're planning to do anything for several months, put it that way. It's going to be a while. Let's get this one in and bed it in and realize the synergies, realize the opportunities before we look again.
Undoubtedly, there are further opportunities to consolidate this market. There's about 18,000 providers of language services across the globe. As I say, we've got GBP 1 billion out of a GBP 57 billion market. There's room for us to grow through acquisitions. On the right-hand side, you can see how we've gone through, consolidated this market over the years, as has some share, particularly with the Donnelley acquisition. We will continue to pursue the most attractive acquisition opportunities where it will bring something different to the RWS Group, where it will enhance margins and most importantly, enhance shareholder value. I think that's probably it for me. Yeah. Handing over to David.
Thank you very much, Richard. Good morning, everybody. If you could move on to the next slide, please. Let me talk a little bit about this combination from an SDL perspective. The board of SDL believes that there is a clear and compelling strategic and financial benefit in this combination between SDL and RWS. Those of you who followed SDL for a number of years will know that under the leadership of Adolfo Hernandez, we've undertaken a significant transformation over the last five years. As a result, we believe we now have, as SDL standalone, the leading technology platform in the world of language, not only in language, but also in content management.
We have an AI-enabled automated workflow and translation management platform, and we've demonstrated the value of this investment through the combination about 18 months ago with DLS, where we have shown the benefit of leveraging that investment in technology through volume and scale. Importantly, we've also been undergoing a transformation whereby we've been moving more and more of our focus in terms of market segments towards the premium sectors for language services. We think that to truly realize the value of the investments that we've made for the benefit not only of shareholders, but also for customers and for employees, we need capacity and we need scale. We need the capacity to continue to invest, and we need scale to fully leverage the value of those investments that we have made. We think this combination delivers both that scale and that capacity.
I've been impressed through our discussions with RWS by their commitment to our technology investments. They have assured us that they will continue not only to support the level of investment that we're making, but also to increase it as we see opportunities. Those of you who are familiar with the markets we serve will know that this is a highly fragmented market, and that we believe the market can be consolidated through the implementation and standardization of technology. We think that SDL delivers that technology platform, and combined with RWS, we will have market reach and scale to enable this business to continue to thrive. If we could move on to the next slide, let me talk a little bit about the offer timetable. The publication of the offer announcement is clearly today.
This combination will be implemented via a court-sanctioned scheme of arrangement, and it requires a simple majority approval by RWS shareholders. Indeed, the approvals for SDL shareholders will be via a general meeting and a court meeting to approve the scheme of arrangement. We will be filing merger control clearance requests within Germany, Russia, the U.S., and the U.K. Again, those of you familiar with this market will know it's a highly fragmented market, but it is necessary for us to file in these jurisdictions. With that, I'd like to hand it back to Andrew.
Could I have the next slide, please? I'm now wrapping up the presentation and summarizing why we think this is a compelling combination. As I said right at the beginning, RWS comes from a long history, over 60 years, of specialist technical language services. SDL also been in business for quite some time. They come from a tech background. If I think of two jigsaw pieces, RWS provides the scale and additional work that the techno-
We seem to have lost Andrew's internet connection.
Yes. Why we're buying SDL so that we can get their technology in to fix things like that. I think I'm not too sure if he's aware that we can't hear-
Yes. Andrew, we lost your sound. The internet connection cut out. Could you go back to the beginning of that slide?
Well, of course. Nobody's heard anything of this slide? Okay. I'm wrapping up this presentation by summarizing why we think this is a compelling combination. RWS comes from over 60 years of specialist language development. Has always been perhaps a little behind on technology, driven by where its customers were comfortable. SDL has emerged. They come from a technology background and has emerged as the language industry's leading technology platform. The combination of the two, therefore, extremely compelling in our view. Our customers will be able to benefit from a much wider proposition in terms of products and services, and we expect that to generate margin improvements and revenue synergy improvements. We are particularly keen to develop our joint combination as it pertains to the life sciences industry and to the technology sector where we have market leading positions.
It generates substantial value from the GBP 15 million of cost synergies that Richard has taken you through, and of course, the rather more significant number of cost synergies which we're not allowed to give a number for because they can't be validated on today, but nevertheless, will provide a stimulating program for us to try to unlock. The group, in its combined form, will have attractive margins, a highly cash generative profile, and in particular, as the result of this being an all stock or all share transaction, we will end up with a particularly strong balance sheet. Net cash we expect at completion. All providing a platform from we can invest both in our organic business and in those opportunities inorganically. Acquisition opportunities in a rapidly consolidating and very fragmented industry.
The RWS board does expect that the combination will result in double-digit earnings per share accretion in the first full financial year post-completion. That concludes the actual presentation itself, and we are now ready for questions and answers.
We are just taking verbal questions. To verbally ask your question, raise your hand using the hand icon at the side of the control panel or at the top on a mobile or other device, or on the conference call, dial five star. We will then come to you by name and unmute your mic. We're waiting for questions to come in. We have a question from Ken Rumph from Jefferies. Ken, we're just unmuting your mic. Go ahead and ask your question.
Hello, everybody. Thanks for the presentation this morning. Congratulations on the combination, I should say. I wanted to ask you a couple of questions. One was, you mentioned at one point no dis-synergies. I just wanted to confirm that you don't feel that there are any parts of the SDL business that you wouldn't want to continue with going forwards or that you imagine you would de-emphasize. A related question, perhaps secondly, would be, one could consider machine translation as kind of replacing people. Should we rather think that you use the people where you need them and machine translation where you need them, and therefore potentially generate maybe more revenue rather than sort of cutting people to deliver the same amount of work?
Finally, and thanks for the questions, what kind of sort of reporting structure, I appreciate it's early days, might we expect for the group going forwards? Is this going to be divided on sort of life sciences, technology? How broadly do you think you might be reporting this combined company going forwards? Thanks very much.
I suspect that all three of those need to be answered by Rick.
Yeah. Three? I think there was about five in there, I think. Well, appreciate the questions. Starting with the dis-synergy one, there was limited overlap of customers. We were surprised about how limited they were. There was one enterprise customer which we did some work on in terms of dis-synergies, and there's a small overlap risk there, but it's manageable. When you look at the quantum, it's certainly manageable. We don't think it's a huge problem, but it does need to be communicated carefully and managed. We've done that before when we did the Moravia acquisition, and clearly when we've done the two life sciences acquisitions, CTI and LUZ. We've had experience in this area. In terms of areas where we might put less emphasis, not at the moment, no. We're committed to all parts of the business.
I think the area you might be talking about or alluding to is the language content business that SDL has, which has been, I think a couple of years ago, they sold parts of that, Fredhopper being part of it. No, it makes a profit. Why would we change it? We've got other more important areas we need to get on with and other more important areas that we need to deliver on. The vision, the synergies, for example, driving sales growth, keeping staff happy, et cetera. No, we won't be de-emphasizing anything on that. In terms of machine translation, absolutely. We're not the only industry that's going to be or is being changed by AI and machine learning, for sure. We're already seeing it within RWS, and roles are evolving and developing.
Of course, we move people from one particular role to another where it makes sense to do so and where it enhances our customer service, et cetera. We utilize people in different roles all the time. We train them, upskill them, et cetera, to fit into those new roles. What we're seeing with machine translation is Well, what we're seeing in general is, of course, with globalization and digitization, there's a mass of content that our customers have now got. That's great, but most of it is in different languages and they can't understand it. What they need to do is get ways of simply understanding that data. Using Helix, they can do that using in-house, what I just touched on, the translation memory and the machine translation, et cetera.
I think roles will definitely change as we go forward, and that's really part of this transaction, is to get ahead of the game, and by bringing both businesses together, we do that. In terms of the reporting structure, you're right, it is early days. However, the way that we see it working at the moment is that currently RWS reports as three divisions and three profit centers. We're looking to move, although these are still early days, and we've said we're going to have a period of time where we assess the structures and we assess the plans and we talk to the people concerned, because I think there's always a danger when you've done the limited DD that we have, that you sort of make statements that people come back to haunt you.
The initial thoughts at the moment are that the way we will run it is that we will have the data content business as a standalone P&L business with somebody responsible for the profit of that business. Similarly with the tech business, there's somebody responsible for the profit of that tech business. We'll have a regulated industry, which is the language translation piece, similar, and that's where our life sciences business will slot into. The person in charge of that division will have responsibility for a full P&L. Then we'll have language services, which is where the part of the Moravia business, the tail of the Moravia business, will sit into. Again, we'll have one person in charge of that with full responsible for P&L. Responsible and accountable for the P&L, and that's a slight change for SDL's structure.
That's still to be decided, still to be worked on. You'll have Moravia, you'll have IP services, you'll have two language services business, regulated and non-regulated. You'll have a tech business and you'll have a content business. There'll be about six divisions within RWS, is how we see it, how I see it at the moment. As I say, that's subject to change.
Okay. Look, thanks very much. I could come up with more questions, but I'll save those and go back in the queue. Thank you very much.
All right. Thanks a lot.
We'll next go to Calum Battersby from Berenberg. Calum, we're just unmuting you now. Go ahead and ask your question.
Yeah. Hi, morning, guys. A couple from me. One of the points you mentioned is that this should accelerate your ability to roll out neural machine translation across your clients. I was just hoping you could talk through what this does. Is this therefore an additional product on top of services you currently offer that should accelerate organic growth? Does this switch existing work to a likely higher margin product that had less reliance on freelancers? Secondly, when you ran through the potential additional synergies that aren't in the original GBP 15 million target, you mentioned better utilization of SDL's tech. Would you mind just talking through in slightly more detail what that means in practice and where you see the most meaningful opportunities? Thanks.
Sure. In terms of the accelerating NMT, we've talked to you, Calum, in particular, being one of the analysts that cover RWS. We've talked to you about the opportunities we see from, and the requirement from the market to move into NMT because the market is expecting it. They know that NMT is or becoming more accepting to the use of neural machine translation within the translation process. There's a demand, and there's also a requirement for us to get ahead of the market. When we're talking here about utilizing SDL's neural machine translation, it's part of a natural evolution of the processes that we're adopting. Clearly, with neural machine translation, there is less human involvement. You do improve margins, at least initially. Eventually, procurement tends to sort of catch up with you. Initially, there will be an improvement of margins.
We've seen evidence of that from the work that SDL has done with putting Donnelley onto their Helix platform. It's a kind of an evolution, which will lead to better efficiencies, more faster throughput, the ability to go wider in terms of content type, et cetera, less human involvement that will improve our margins. The second question was about synergies, wasn't it? About SDL tech? Is that a similar question?
Yeah. You mentioned, yeah, better utilization of SDL tech as an additional synergy. I'm just hoping to give slightly more color on what that means and where the opportunities are.
I think the way that the market is going, and David kind of sort of alluded to this, is that with the Helix platform, what we believe is going to be happening is that the market just wants translation. It wants it quickly, accurately, and it wants it fast. The turnaround times are speeding up all the time. They almost want immediate translation and immediate understanding about what's going on within their organization. In order to do that, you can't rely on humans processing and then handing off to another human, then handing off to another human, then to a translator and back in. It's just too unwieldy and too slow. What Helix does or where Helix is going is to have one platform that does it all automatically.
That the content type, doesn't matter what content type the customer has, it sends it in, Helix then analyzes it, sees what it is, who's done it before, what the customer requirements are, then feeds it off automatically to the different processes. It'll run it through our translation memory, run it through a machine translation, and then if the customer requires post-edit localization services, it will automatically fling it off to freelancers or in SDL's case, in-house translators who've touched that product before, know what that customer wants, who will then review it, change it, edit it, send it back in automatically, and then it will get sent out to the customer via desktop publishing if that's what the customer wants. That's where the industry is heading. With that one platform rather than many, you get efficiencies, you get economies of scale, which drive through your margins.
Sure. Thank you. Thanks, Richard.
Thanks. Cheers, Calum.
We have one more question, but just before we take that, a reminder to verbally ask your question, raise your hand using the hand icon at the side of the control panel or on the top on a mobile or a device, or on the conference call, dial five star. We'll now go to James Beard from Numis. James, we've unmuted you. Go ahead and ask your question.
Hi, James.
Thanks. Morning, all. Two questions from me. Firstly, on the customer side of things, just wondering if you could talk a little bit more about the overlap between yourselves and SDL and whether you've had any conversations, what the feedback has been with customers, both shared and separate customers to date. Secondly, on the GBP 15 million synergies, can you give us an idea of what the sort of cash cost of delivering those synergies is, please?
The first one is easier than the second one because I can't remember the number on the second one. The first one, because we're PLCs, we've only been allowed to do limited due diligence. We've not shared full customer lists. We've not shared any of this information about the transaction with any of our major customers. What we did was we looked at top customers in terms of buckets of revenue, and then matched them up, and it became clear that the overlap is limited in that top sector of our customers by revenue. There was only one customer where we had slight concerns, and we got Pricewaterhouse t o come in and do some dis-synergy P&L. We basically did a customer service piece. I'm just smiling because Des Glass, my CFO, has just sent me a text helping me out on the second question.
Thank you, Des. Appreciate it. We looked at Pricewaterhouse to look at dssynergy work, and we became satisfied with that the risk was relatively manageable. We were surprised at how little, based on the work we've done so far, how little overlap there is. That's great for cross-selling synergies. That does give us the opportunity to sell our different services to a much wider base. In terms of cost, it's GBP 17 million as the one-off cost that's going to be required to realize that GBP 15 million. The GBP 15 million will be realized over 18 months, I think it is. Some of it will be out pretty quickly, obviously. You can think back to the buckets I described, and you know which ones are going to go quickly and the ones that will take longer.
We don't want to damage this business. It's a fantastic business that we're combining here. We don't want to damage it. It will be done slowly, it will be done with caution where it needs to be, because we are a people business. Without those people, we are nothing, and we will do it with respect. That's the way we've always done it. We've done these integrations extremely well, we've done them well. We will continue with that process.
Thank you.
You're welcome.
We'll now go to James Zaremba from Barclays. James, we're just unmuting your mic now.
Go ahead and ask your question.
Hi. Morning. In terms of the cost, just one follow-up would be, do you have an idea of what the actual, I suppose, acquisition costs will be in terms of your 80-page report and all the etcetera you use?
Oh.
A second one would be, just in terms of technology, I guess, RWS historically, being a technical translation area, one of the attractions of the show is that the disruption from technology has maybe been lesser than in areas where you're competing on neural machine translation, et cetera. Can you just maybe talk a little bit in terms of your changing views on that? Now we're talking about using machine translation in the IT services business as well as, I guess, language life sciences, which we've done for the last couple of years, and I guess, the kind of perception of risk around how that pace of change is happening with your customers to a business which has had remarkably high margins and consistently high margins for a long period of time.
Another one would be just around in terms of SDL technology, what is the kind of overlap with Iconic in the acquisition made earlier this year? What are the kind of the differences that those two acquisitions bring? Again, as a business where you are acquiring technology, I suppose, what gives you confidence that that is going to be the market leader? Is it because it is the scale player and they will be able to invest the most, or is there any other area of due diligence as to why you think SDL technology is the best? Thanks.
Yeah. Cost for us on a one-off cost, I think about GBP 8 million, GBP 9 million. What the city charged for these transactions is outrageous for the value it adds, but don't get me started on it. We had lots of bloody arguments about people giving you pages of documents going back to 2006 or saying, "That's the rate for the discount." Anyway, getting off my soapbox. GBP 8 million-GBP 9 million for us, and I think a similar amount for SDL, but I'm not too sure. We'd have to come back to you on that one. The one-off costs, they are high, but believe me, we beat them down to get to that figure. In terms of the technical translation within the market, the market is moving. Every single sector that you look at as investors and analysts, et cetera, they're all moving.
They're all moving because the algorithms, be them rogue or whatever, the algorithms are moving forward. The AI is moving forward, which means that every single sector that you look at is changing. We need to be there, and we need to be adopting our processes to cope with that change. We've talked before about the introduction of machine translation into life sciences, which is something that we're doing, and we're doing it with Pfizer, as you know. We're rolling out that program around the world to centralize and use machine translation in the whole regulatory translation process. That's an evolution of where the market is going. Is the market accelerating in terms of tech? Maybe. Maybe a little bit. I think we're seeing more and more RFPs with a technical bias.
Whereas up to now, RWS has been a best-of-breed player with lots of ISO this and ISO that, showing how independent and secure we are. There's certainly an advantage to bringing SDL in-house because it reduces our technical risk to a degree, and also still allows us to be fairly flexible with our big enterprise clients. If you think about who we serve on the West Coast of America, they've already got their own tech. We need to be flexible in that regard, which is why we're moving our enterprise clients, the larger SDL enterprise clients, into Moravia. I don't think it's accelerated. Well, maybe it's accelerated a bit, but not noticeable. This deal is sensible because it brings tech and the best of the language services together. Will it dilute our margins? Don't think so, no.
We've certainly not seen it on the Pfizer project, for sure. Our margins have actually increased because of the efficiencies of the machine translation process actually means that you're spending less on that translation. Also what we're seeing is, we're seeing that because machine translation is quicker, faster, more efficient, it actually widens the amount that you have available for translation. Customer sort of says, "Oh, we'll get this translated. Oh, we'll get that translated." Because it's easier. You just put it in and it comes back and they've got it. No, we don't believe that margins will fall a result of this. I think it will peak a little bit whilst you prove that it works, then what tends to happen is over time, procurement sort of beat you down on the price, so you get back to pretty much the same level you were.
It's a bit of a blip, and then it comes down, is what we would expect. In terms of the SDL Iconic overlap. Iconic is the machine translation engine we're using within the Pfizer product. The reason we're using it is because it's a very bespoke machine translation offering that you can tailor-made to specific customer requirements. It's particularly useful on big, huge global projects. Whereas SDL's machine translation is more generic, and is much more easily installable into a customer with their battery of connectors and with experience. We see Iconic and SDL's MT kind of working like that, with Iconic sitting as the I'd say this with David on the call, but the Rolls-Royce and SDL's MT perhaps as the, I don't know, the Jaguar or the Mercedes. It's sort of like that is the way we see it.
What was the last one? Confidence in the tech and what makes us think the tech is good. As I say, we did two lots of tech DD on the content. One, we know SDL from the market. We see it in the market. Some of our customers already use SDL's tech, we know what it does. We know how it works. We even use the tech. We know that their translation memory technology is the best there is out there. We know how good they are. We can see from and hear back from our customers how their technology's improved and how their roadmap has advanced over the last two, three years. That's extremely good.
We also brought in, as I say, a third-party Tech DD company who gave it the best report that certainly I've ever seen, and the other people that have seen this report say it is outstanding due diligence report. We also did our internal DD to make sure that we believe that we can do what we wanna do, which is put our services onto their platform.
Maybe just a quick follow-up, because you mentioned, I suppose, in terms of the synergies, Moravia, they currently use SDL today. I guess in terms of maybe why that isn't, was it because they've got a cheaper provider or the provider they use is slightly advanced in different areas?
No, nothing like that. They took the decision that SDL was a competitor. This is before we bought them. They took the decision that SDL was a competitor and didn't want to put their tech through SDL's software. To put their services or rely on SDL as a result. They thought it was too much of a technical risk for them.
Okay.
Yeah, that clearly changes with everybody in-house.
We have the next question from Ken Rumph at Jefferies again. Ken, you're unmuted.
Welcome back, Ken.
Ken.
Can't quite hear you.
Ken, go ahead and ask your question.
Come on, Ken, you're not shy.
Right. Hello? Can you hear me now?
Yes, we can hear you, Ken.
Yes.
Hello. Can you hear me now?
Yes, we can.
Okay.
Go ahead and ask your question.
Thank you. Sorry for that. I'd muted myself.
It's okay.
I'm sure something you would wish I did more. Two questions. One probably for Richard. Probably you want to sort of restrain your enthusiasm so as not to sort of go beyond what you can say. You've referred to the sort of strictly defined synergies, GBP 15 million with a cost of a similar amount and an 18-month kind of timetable. You also referred in a limited way that you have to kind of potentially larger synergies without, and you shouldn't, going into what those might be. Should we, however, if we were thinking, okay, maybe there's a larger number out there, should we assume that it would have a similar kind of, the cost is similar to the one-year synergy amount, or will it be more or less expensive?
Equally, should we assume it's a similar kind of timetable without making any comment about what the number might be, would the cost of achieving it be similar and would the timetable be similar? Maybe it is a bit longer because these are more complex things.
That's a really good question. As I said, we're very much in the early days of our initial planning on this. If I think back to the overall quantum of the cost that we came up with, I think there will be some overlap with the sort of GBP 15 million. In terms of timetable, there is a chance within that 18 months to beat the GBP 15 million because some of the other actions may happen coterminus. I can think of a couple of the relatively quick decisions that we could make. In terms of the cash cost, I think for now you should assume it's going to be at the same level. Maybe slightly less, thinking about it.
Okay.
Because the synergies, without going too much detail, the.
The synergies come from items we've talked about and are pretty obvious. We get better efficiencies. We will do things differently. We will have to stop doing some things that are done currently, but the cash cost will be at a similar level. I think, without wanting to put my head on the block with chairman and non-exec directors on this call, I think we'll be disappointed if we don't take out more than GBP 15 million over that period. I don't know we will be.
Okay. That's probably a good place to stop on that rather than we have the trouble you say.
Yeah.
A question probably for David, which is, could you describe the kind of communication process and plan for SDL? There's a group of people here whose company is effectively being taken over, Chief Exec's going. There's going to probably be a certain amount of uncertainty about the future of their business going forward. I think a word on that would be useful. Thanks.
Sure. Adolfo is talking to colleagues as we're talking. I know that he's got a company update meeting this morning. I think the message is clear, and I think it's been clear on this call. The opportunity to participate in the global market leader in a highly fragmented, consolidating sector that continues to demonstrate good growth, that is undergoing some transformation as a result of the impact of technology, we think provides great opportunities for our colleagues and employees at SDL, just as they are for colleagues at RWS. Actually, if you look at the size of the workforces of the two organizations, and you actually plot it back over time, both businesses have been growing strongly. Whereas, quite rightly, Richard talks about opportunities for synergies, we also think there are opportunities to grow and expand the business and redeploy colleagues in new growing areas.
To us, that's what's really exciting about this combination. It's been interesting for me to hear Richard talk a little bit about the application of not only our language technology, but our content technologies as well. One of the things we were able to do with DLS was we've been able to introduce a number of our technologies, particularly actually around the content side, but both web content management and structured content management into that DLS customer base. We think the same opportunity exists here within RWS. Yes, of course, it will be a period of uncertainty, which is why Richard has the task of moving as quickly as he possibly can, notwithstanding the fact that we are in a process that has to go through a court sanction.
There are limits about what we want to do, and those of my SDL colleagues who are on this call will all want answers tomorrow, and understandably so. Sadly, we need to go through a process. I guess my only comfort and reassurance comes from the fact that we are both growing businesses, and we will continue to be growing businesses. We think this presents terrific opportunities to the employees of both firms.
Thank you very much. We're out of time now.
Thank you.
Andrew, do you have any closing remarks?
Well, I am confident that as a result of this webinar, anybody that's attending it will understand the compelling nature of the combination. We've been through all of those features. We are very excited about the future once we've got these processes out of the way that David has just alluded to. We're expecting the deal to complete early October, unless we run into antitrust problems, which we're not expecting, but can always happen. We are looking forward to this combination with great excitement, and I'd like to thank everybody that has attended the webinar for their attention over the last hour. Keep following us. Thank you.
Many thanks, Andrew, Richard, and David, and to you all for joining. This is the end of the webinar.