M&A Announcement

Aug 27, 2020

Good morning. Welcome to the RWS and SDL Webinar. There's a PDF of the slides on the right hand side, and this webinar is being recorded. I now hand over to Andrew Brodie, 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 percent for the ongoing RWS shareholders of the combined entity, 29% for SDL, an offer price there for 907p, an approximate offer equity value of 854,000,000 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 breakdown, and we believe its language technology expertise is market leading in the LSP world. So our customers, the joint customer base, will have a much wider proposition, and we are 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, and we're already the leader in the large enterprise technology space, particularly on the West Coast with the fangs of Microsoft. And the purposes of this combination, we are allowed to indicate that we see at least €15,000,000 of cost synergies signed off by our financial advisers. We believe there are significantly more than that available, but at this stage, the takeover panel doesn't allow us to identify those 2. 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. So 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 1st 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. So our combined 2019 revenues were £732,000,000 The closest competitor sits at about just over 600,000,000 currently, whereas these are the 2019 numbers that you're looking at. We will have adjusted PBT last year of over €100,000,000 109,000,000 cash inflow of €111,000,000 and 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, but for listed companies in particular. So I am wanting to use this opportunity in the combination of creating as an independent award as we can do. So 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 reelection at our next AGM. He will stand down. He'll be succeeded by Laura Borro, the Chief Executive of The Economist Group, who's been an NED on our Board for 2 years plus now. David, who is on this call, will be invited to join as the Non Executive Director and STL will supply 1 further Non Executive Director. Who that is, is yet to be confirmed. And outside of that group, our key executives will be Joe Lugo on our side, so from the he's the Chief Operating Officer of the Alibrias Group at present. And as at Uttam, 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. And we will continue to prioritize our ESG agenda. 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? So RWS floated in 2,003 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. So 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. But 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 3 old men that you've got in, well, it takes quite a lot to get us 3 old men that you've got presenting to you today excited. But I think this transaction does. And the reason that it does is because what it's doing is bringing together the best bits of the language services market and that you're putting together SDL's world leading superb tech with language tech with RWS' language services. So it fits like a kind of sort of a bit of a jigsaw. And 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, etcetera. So by bringing these 2 bits together, what do we do? Well, we actually utilize we're going to be utilizing more of their SDLs technology, using their Helix operating platform and putting more work down that platform, as we'll hear in a minute. And this transaction enhances, 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. And this combination creates a business, a world leader, 2 British companies, 2 PLCs coming together to take or create a world leader in language services and language tech with sales just shy of €1,000,000,000 and a market of €57,000,000,000 that's growing rapidly. So it's a real good success story. But as the key here is clearly SDL's technology and their vision. And what we want to do is we want to carry on the work that they've done over the past 2 years. And that's why that, excuse me, the Azad Utman appointment as the group CTO is so important. Those of you know RWS will know that we run a divisional structure with 3 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. So what we're going to be doing is moving 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 3 divisions and have them reporting directly into us at creating a CTO role and a CTO structure, tech structure, which allows us to streamline, simplify and improve and STL has been going over the last few years. So if I skip over a schedule, because I should have said that to begin with a move over from this schedule to the next one. And I think I've already covered that one because I forgot to tell you to move the slides. So this is better because it's substantially bigger group. And what will it allow us to do? Will it allow us to improve the customer service, obviously? And it will increase revenue opportunities because we can have a much larger sales team, better geographic coverage on wider product offerings. And I touched on the product offerings already, but 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 RWSA 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' customers. And 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. And then finally, they've both got SDL has got other businesses. They have a language tech business and a language content business. There is an opportunity to sell their content business, which is Tridium and it's to do with websites and compete make sure websites are constantly updated with fresh content and also in the right languages at the right time with the right localization, etcetera. There's an opportunity for us to actually sell those services into RWS's existing customer base. And 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, also got the whole library of connectors, etcetera, makes it much easier a selling process. And further out, we see improvements, opportunities to improve the margin. SDL have done a really good job in integrating Donnelly 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 improvement. And finally, I think I would say that the recent launch of SLAIT, which is effectively an in house machine translation product by SDL, it's really exciting for us because we are getting increasing number of inquiries from customers and non customers about whether we offer a product that can actually people can take in house, use it themselves for machine translation. And we see that as a way of getting into new customers primarily in that they will buy slate, they will then we can upsell from that offering. So if I move on to the next slide, which shows you the geographic footprint of the 2 businesses. And you can look at the schedule in 2 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. But again, you can flip that round and say, actually, there's a lot of offices there. And 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. And that's great. And we will support that program of office rationalization. And I think in a post COVID world, I think many companies, including SDL and RWS, are realizing that we don't need as much office space as they did before. So RWS will support that program and look to accelerate it. But just to be clear, when we move on to the next slide or 2 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 €15,000,000,000 €15,000,000,000 cost synergies that I'll come on to. But undoubtedly, there is an opportunity here to rationalize our office structure. If we move on to the next slide, yes, yes, Andrew touched on this. I mean, if you're going to focus on 2 sectors going forward in a post COVID world, I think Life Sciences and Technology are the ones to focus in on. And that's what we're doing as part of this integration structure. As we're proposing it at the moment, I mean, clearly, with the 2 PLCs, the limited amount of due diligence you can do, limited amount of work that you can actually find out about the other side. But 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 Donnelly, they can improve gross margins. And then similarly, we will move part of the Moravia general translation business again onto the Helix operating platform because again, we think that will improve margins. And 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. So if I move on to the next schedule. Yes, this is the synergies that we've got and 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 not both sides, they're quite nervous about being getting the numbers wrong. So we started out with a much bigger number than €15,000,000 on the cost synergies, the opportunity to reduce costs. But Pricewaterhouse took the view take the view that it's going to be a pure synergy. It'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 of to do something differently by RWS. So there's a much bigger number behind that €15,000,000 that then gets whittled down to what is a pure synergy and then Pricewaterhouse whittled it down even further to they discount it by how much they think you can actually deliver on. So the €15,000,000 is underpinned by a safety bucket, if you like. And 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 reduction. And we'll see that on a following slide. But where does the €15,000,000 come from? Well, it comes from 4 buckets there. It comes from because we're 2 PLCs, clearly, there is an opportunity to reduce PLC costs. So that's the top 40%, that's 66,000,000 euros sorry, that's €6,000,000 And that's the board costs, it's the board support costs, it's a number of group functions that would go because of the overlap there. 2nd area where we think there is some cost synergies is on the sales and marketing. SDL has a number of a large number of sales and presales and marketing people who are doing a great job. But clearly, with the combination of the two businesses, there's an opportunity there to review where we do have salespeople, where and regions and what they do and how they do it and there's an opportunity there. Plus marketing will we can rationalize that. So that's the 2nd bucket of €6,000,000 the second 40%. But for certain third party spends, RWS already uses SDL's technology. We pay for it in lines of 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. But we don't use it all the way through our divisions. For example, Moravia don't use SDL's technology at all. So by extending it over Moravia, then that means there are 3rd party license costs that we incur currently, which we won't be incurring going forward. And that's the 15% you see in the 3rd bucket. And then finally, on the 4th 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 life science, RWS Life Sciences division, moving that across the Helix, similarly with the Moravia tail looking to move that across, there will be efficiencies, efficiencies of scale, efficiencies of simplification, etcetera. So that's the 3rd bucket of that 50 ks at the bottom there. And those 4 buckets toss up to the 15,000,000 that we believe we can deliver. And then as a result of that, taking that into account, then we get significant double digits sorry, double digits earnings accretion. So if I move then on to the next page. Excuse me. You tell us early in the morning, can't you? So what we get here, I mean, 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 $732,000,000 just shy of $1,000,000,000 And I think the an operating profit of just over £116,000,000 And you could also see the margin of 15%. Now if we and that's pre any synergies, if we took the €15,000,000 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% to 18% definitely, and then we believe we can get beyond that as well. And 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. And 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 translations services into our high-tech customers that we have currently. And also looking at the ways that we can sell that SDL's content services, language content, their marketing website business, etcetera, into our customer base. I'm always cautious about revenue synergies. Everybody's heard me before says they take a long time to deliver on. And I'm an accountant by trading, so I'm always prudent on these things. But 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. And the business, the key point to note is that business is highly cash generative. I think everybody on this call probably knows that. We are we have very low CapEx requirements. And as a result, we generate an awful lot of cash and over €100,000,000 pro form a cash for FY 2019. We haven't put any cash. We haven't put any debt into this transaction. And that's because well, one, because we didn't need to. We think 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 and carry on in terms of not only organic growth, but also acquisitive growth. So 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 remove the remove or realize the synergies, realize the opportunities before we look again. But undoubtedly, there are further opportunities to consolidate this market. There's about 18,000 providers of language services across the globe. And as I say, we've got €1,000,000,000 out of €7,000,000,000 market. So there's room for us to grow through acquisitions. And on the right hand side, you can see how we've gone through consolidated this market over the years as has Sierra with particularly with the Donnelly acquisition. And we will say 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, almost importantly, enhance shareholder value. And I think that's probably it for me. Yes, so handing over to David. Thank you very much, Richard, and good morning, everybody. If you could move on to the next slide, please. So 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 5 years. And 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 that 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 continually 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 office announcement is that the offer announcement is clearly today. This combination will be implemented by our core sanction scheme of arrangement, and it requires a simple majority approval by RWS shareholders. And indeed, the approvals for SDL shareholders will be via a general meeting at the court and a court meeting to approve the scheme of arrangement. We will be filing merger control clearance requests within Germany, Russia, the United States and the United Kingdom. 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. And with that, I'd like to hand it back to Andrew. Could I have the next slide please? So I'm now wrapping up the presentation and summarizing why we think this is a compelling combination. So I said right at the beginning, RWS comes from a long history over 60 years of specialist technical language services. And SDL, also been in business for quite some time, but they come from a tech background. And if I think of 2 jigsaw pieces, we provide RWS provides the scale and additional work that the technology We seem to have lost Andrew's Internet connection. Yes. That's why we're buying SDL so that we can get their technology and to fix things like that. I think I'm not too sure if he's aware that we're asking. Yes. Andrew, we lost your sound. The Internet connection cut out. Could you go back to the beginning of that slide? Well, of course, but so 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 as the they come from a technology background and has emerged as the language industry's leading technology platform, and the combination of the 2, 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 $15,000,000 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. So the group in its combined form will have attractive margins, a highly cash generative profile. And in particular, as a 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 and all providing a platform from which we can invest both in our organic business and in those opportunities inorganically, so acquisition opportunities in a rapidly consolidating and very fragmented industry. And the Isle of Risk Board does expect that combination will result in double digit earnings per share accretion, accretion in the 1st full financial year post completion. So that concludes the actual presentation itself, and we are now ready for questions and answers. So we are just taking verbal questions. And 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 5 star. We will then come to you by name and unmute your mic. And we're waiting for questions to come in. And we have a question from Ken Rump from Jefferies. Ken, we're just unmuting your mic. Hello, everybody. Thanks for the presentation this morning. Congratulations on the combination, I should say. I would like to ask 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 forward or that you imagine you would deemphasize. 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 will potentially generate maybe more revenue rather than sort of cutting people to deliver the same amount of work? And 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 forward? 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 forward? Thanks very much. I suspect that all three of those need to be answered, sorry. 3, I think it's about 5 in there, I think. I appreciate your good questions. I mean, starting with the dissynergy one. I mean, there was limited overlap of customers. We were surprised about how limited they were. There's 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 within when you look the quantum, it's certainly manageable. So we don't think it's a huge problem, but it does need to be communicated carefully and managed. But we've done that before when we did the Muralvia acquisition and clearly when we've done the 2 life sciences acquisitions, CTI and Luz. So 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, Fred Hopper being part of it. But no, it makes 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, So no, we're not we won't be deemphasizing anything on that. In terms of machine translation, absolutely. I mean, 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. And of course, we would move people from one particular role to another where it makes sense to do so and where it enhances our customer service, etcetera. So we utilize people in different roles all the time. And we train them, upskill them, etcetera, to fit into those new roles. And what we're seeing with machine translation is what we're seeing in general is, of course, with globalization and digitization, there's a massive content that our customers have now got. But that's great, but it's a bit most of it's in different languages and they can't understand it. What they need to do is get ways of simply understanding that data. So using Helix, they can do that using in house, what I've just touched on the translation memory and machine translation, etcetera. So 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 business together, we do that. And 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 we report as RWS reports as 3 divisions and 3 profit centers. We will be moving 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 sort of done the limited DD that we have that you sort of make statements that people come back to haunt you. But 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 and 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. And we'll have a regulated industry, which is the language translation piece similar, and that's where our life sciences business will slot into. And that will have person in charge of that division will have responsibility for a full P and L. And then we'll have language services, which is where the part of the Moravia business in the tail of the Moravia business will sit into. And again, we'll have that one person in charge of that with full responsible for P and L responsible and accountable for the P and L. And that's a slight change for SDL's structure. But that's still to be decided, still to be worked on. So you'll have Moravia, you'll have IP services, you'll have 2 language services business regulated and non regulated, You'll have a tech business and you'll have a content business. So there'll be about 6 divisions within RWAs. This is how we see it. How I see it at the moment, but as I say, it's subject to change. Okay. 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. So we'll next go to Calum Battersby from Berenberg. Calum, we're just unmuting you now. Go ahead and ask your question. Yes. Hi, good morning guys. A couple from me. The one of the points you mentioned is that this should accelerate your ability to roll out neural machine translation across your clients. I'm 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? Or has this switched existing work to a likely higher margin product to have less reliance on freelancers? And then secondly, when you ran through the potential additional synergies on in the original $15,000,000 target, You mentioned better utilization of FTL'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. Yes, sure. In terms of the accelerating NMT, I mean, we've talked to you, Butte, Calum, in particular, being one of the analysts that cover RWS. We 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 the NMT is becoming more accepting to the use of neural machine translation within the translation process. So there's a demand and there's a requirement for us to get ahead of the market. So when we're going to be when we're talking here about utilizing SDLs, neural machine translation, is part of a natural evolution of the processes that we're adopting. But clearly, with neural machine translation, there is less human involvement. So you do improve margins at least initially. Eventually, procurement tends to sort of catch up with you. But initially, there will be an improvement of margins. And that's we've seen evidence of that from the work that SDL has done with Donnelly, putting Donnelly onto their Helix platform. So 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, etcetera, less human involvement that will improve our margins. In terms of the question was about synergies, wasn't it about SDL Tech? Is that a similar question? Yes. You mentioned, yes, best utilization of FDL Tech as an additional synergy. I just hoping you could get slightly more color on what that means and where they got 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 it. 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. So the content type doesn't matter what content type the customer has, it sends it in Helix and analyzes it, sees where what it is, who's done it before, what the customer requirements are and feeds it off automatically to the different processes or run it through our translation memory, run it through 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 on to that out to the customer. So there's via desktop publishing if that's what the customer wants. So I mean that's where the industry is heading. And with that one platform rather than many, you get efficiencies, you get economies of scale, which drive through your margins. 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 5 star. And we'll now go to James Beard from Numis. James, we've unmuted you. Go ahead and ask your question. 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 SCL and whether you've had any conversations, what the feedback has been with customers, both shared and separate customers to date? And then secondly, on the $15,000,000 synergies, can you give us an idea of what the sort of cash cost of delivering those synergies is, please? First one is easier than the second one because I can't remember the number on the second one. The first one, we because we're PLCs, we've had to do we've only been allowed to do limited due diligence. So 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 match them up. And it became clear that the overlap is limited in that top sector of our customers by revenue. There's only one customer where we had slight concerns. And we did we got Pricewaterhouse to come in and do some dissynergy P and L, dissynergy work that looked at we basically did like a customer service piece. I'm just smiling because Des Glass, my CFO, who just sent me a text helping me out on the second question. Thank you, Des. Appreciate it. So we did some we've looked at put up price more details to look at dissynergy work, and we became satisfied with that, that the risk was relatively manageable. So we were surprised at how little based on the work we've done so far, how little overlap there is. And 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 EUR 17,000,000 as the one off cost that's going to be required to realize that €15,000,000 The €15,000,000 will be realized over 18 months, I think it is. Some of it will be up pretty quickly, obviously. And 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 as we because we don't want to damage this business. I mean, we don't want to it's a fantastic business that we're combining it. So we don't want to damage it. So we'll be done slowly. It will be done with caution where it needs to be because we are a people business. And that's without those people, we are nothing and we will do it with respect. And that's the way we've always done it. And we've done these integrations extremely well, we've done them well. So we will continue with that process. Got it. Thank you. You're welcome. And we'll now go to James Seremba from Barclays. James, we're just unmuting your mic now. Go ahead and ask your question. Hi, good morning. Yes, one in terms of the cost, this 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 advisers, etcetera, you need. A second one would be just in terms of technology, I guess, part of the historically being a technical translation area, one of the traction in the shell is that the disruption in technology is basically lesser than in areas where you're competing on neural machine translation, etcetera. 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 and life sciences, which has been done for the last kind of couple of years. And I any kind of perception of risk around how that pace of change is happening once 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 SBL technology, what's the kind of overlap with Iconic in that position made earlier this year? What are the kind of the differences opposed to acquisitions bring? And then again, as a business where you're acquiring technology, I suppose, what gives you confidence that, that is going to be the market leader? Is it because it's the scale player and that's the most or is there any other added due diligence sort of why you think in SGL technology is the best? Thanks. Yes. Cost for us on the one off cost, I think about €8,000,000 €9,000,000 I mean, what the Citi charge for these transactions is outrageous for the value it adds. But don't get me started on it. I mean, we had lots of bloody arguments about that people look giving you pages of documents going back to 2,006 or saying that's the rate for the discount. So I mean, anyway, getting off my soapbox, euros 8,000,000 to €9,000,000 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, I mean, the market is moving. I mean, every single sector that you look at as investors and analysts, etcetera, they're all moving. They're all moving because algorithms are moving forward. The 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. And we need to be there and we need to be adopting our processes to cope with that change. So 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. So that's an evolution of where the market is going. And 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. And 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 do 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 check. So we need to be flexible in that regard, which is why we move we're moving our enterprise clients, the larger SDL enterprise clients into Moravia. So I mean, I don't think it's accelerated. Well, maybe it's accelerated a bit, but not noticeable. I mean, 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. I mean, what you what we we're certainly not seeing it on the Faiza 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. And 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 sources, oh, we get this translated, oh, we get that translated, because it's easier. I mean, you just put it in and it comes back and they've got it. So no, we don't believe that margins will fall as a result of this. I think it will peak a little bit whilst you prove that it works. And 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. So 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 was is the machine translation engine we're using within the Pfizer product. And 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. And 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. So we see them we see ICONIC and SDLs MT kind of working like that with ICONIC sitting as the sort of the I don't have to say this with David on the cover, but certainly the Rolls Royce and SDLs MT perhaps as the, I don't know, the Jaguar or the Mercedes. It's kind of it's sort of like that is the way we see it. And what was the last one? Was it confidence in the tech and what makes us think the tech is good. We did as I say, we did 2 lots of Tech DD on the content. Well, the one we know STL from the market. We see it in the market. Some of our customers already use SDL's tech. So we know what it does. We know how it works. We even use the tech. So we know that their translation memory technology is the best out there is out there. So we know how good they are. We can see from and hear back from our customers how their technology has improved and how their roadmap has advanced over the last 2, 3 years. So 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 have seen this report say this outstanding due diligence report. And we also did our internal DD to make sure that we believe that we can do what we want to do, which is put our services onto their platform. Maybe just a quick follow-up because you mentioned, I suppose, in terms of synergies, Moravia don't currently use SDLC. So 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 in different areas? No, nothing like that. They took the decision that SDL was a competitor. And they didn't 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. Thank you. Yes, that clearly changes everybody on the in house. So we have the next question from Ken Rumpf at Jefferies again. Ken, you're unmuted. Welcome back, Ken. Ken, go ahead and ask your question. Ken, you're not shy. Right. Hello. Can you hear me? Yes, we can hear you. Yes, We can. Go ahead and ask your question. Thank you. Sorry for that. I had muted myself. I'm sure something you would wish I did more. Two questions. One probably for Richard, which is and probably you want to sort of restrain your enthusiasm so as not to sort of go beyond what you can say. But you've referred to the sort of strictly defined synergies, dollars 15,000,000 with a cost of a similar amount and an 18 month kind of timetable. You've also referred in the 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 1 year synergy amount or would it be more or less expensive? And 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? Or maybe it is a bit longer because these are more complex things? That's a really good question. I mean, 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 €15,000,000 So in terms of timetable, there is a chance within that 18 months to beat the €15,000,000 because some of the other actions may happen coterminous. I can think of a couple 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. I mean, because of the synergies, without going too much detail, I mean, the synergies come from items we've talked about and are pretty obvious, we get better efficiencies. We will do things differently. We will stop doing some things that are done currently. But the cash cost will be at a similar level. I think there's 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 €15,000,000 over that period. So I don't know where it will be. Okay. That's probably a good place to stop on that rather than we have to say. A question probably for David, which is could you describe the kind of communication process and plan for SCL because there's a group of people here whose company is effectively being taken over, Chief Execs going. There's going to probably be a certain amount of uncertainty about the future of their business going forward. So I think a word on that would be useful. Thanks. Sure. So Adolfo is talking to colleagues as we're talking. I know that he's got a company update meeting this morning. And 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. And actually, if you look at the size of the workforces of the 2 organizations and you actually plot it back over time, both businesses have been growing strongly. So when 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. And 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. And 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. So 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. So limits about what we want to do and those of our SDL my SDL colleagues who were on this call will all want answers tomorrow and understandably so. Sadly, we need to go through a process, but I guess my only comfort and reassurance comes from the fact that we will we are both growing businesses and we will continue to be growing businesses, and 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. So we're expecting the deal to complete early October unless we run into antitrust problems, which we're not expecting, but can always happen. So 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 and keep following us. Thank you. Many thanks, Andrew, Richard and David, and to you all for joining. This is the end of the webinar.