Foreign language documents introduce financial and schedule risks for cross-border M&A deals. Here is some quick advice for avoiding the M&A due diligence translation problems I’ve seen most frequently in ten years of M&A translation.
Do you have a cross-border deal in the pipeline? Start today to prepare for translation. Here’s how:
Translate in-house or outsource?
Being bilingual does not necessarily make you a good or fast translator. A few urgent diligence documents can be translated by your in-house multilingual employees on occasion, but there is a limit. For a large M&A data room, you’re going to need numerous professional translators working quickly as a team using translation document-processing technology that you don’t have in-house. Asking your external legal advisor to translate the documents will be unnecessarily expensive. If it’s voluminous and urgent, let a translation provider manage it so you can focus on the diligence.
Get the NDA out of the way
Execute an NDA with your chosen translation provider well in advance. Oddly this simple step often results in 2-3 day bottleneck, at the worst possible time, with your team waiting for documents to review while you coordinate a four-way conversation with your lawyers, the client’s lawyers, the seller’s lawyers and the translation provider. Execute the NDA as soon as you have chosen a provider.
Ensure you have proper document rights
Translation providers need the unprotected electronic files in their possession to keep costs down. If translators have to relocate to your workplace or view files remotely via Citrix or similar, the costs are going to increase significantly. Similarly, if the files are password protected, the translation is going to be delayed. Make sure you can either invite your translation provider to the VDR or download the unprotected documents and send them to your provider. You may need to get permission from your client or the seller, so resolve this step early while you’re finalizing the NDA.
Estimate a realistic cost
The cost of translation is often underestimated, especially when you haven’t planned for it. Ask your translation provider well in advance for an indicative price estimate. The tricky part is that your provider will not have seen your documents at this point, so they will tell you it’s not possible to create a quote. Tell them to quote anyway, agreeing that it’s only an estimate. A provider who knows their business can work with the following basic parameters:
- The number of documents you need to translate (not necessarily the total number of documents in the VDR). Consider, for example, that if you have in-country legal or financial advisors, you probably won’t need to translate legal and financial documents. Take a guess — are there 50 documents, 100, or 500?
- In what languages are the documents?
- Will there be expert financial, expert legal, or expert scientific documents? Estimate how many documents.
- What percentage of the documents are photographic scans? This is a very important step: to use machine translation or perform cost saving analysis, your translation provider will need to have machine-readable documents rather than photographic scans. If you can select text in a document using your mouse then it is machine-readable, which is good news. Photographic scans, on the other hand, need to be converted to Word, which carries a per-page cost.
- What level of detail is required for your purposes? The main priority of a diligence team is to understand the content. This can be achieved by machine translation plus some degree of human post-editing, which is notably cheaper than full, human translation. If however you are the seller and you’re providing the documents to a targeted buyer, then you might want a high-quality human translation, which costs more.
- How quickly do you need translations back? If you send five pages, you might receive them the next day. However, if you send 500 pages on Monday, it will be a Herculean task with a matching price tag to get them back on Tuesday. As a guide, a full translation of five documents per day (on average about 40 pages with 10,000 words) should be achievable without additional costs, as long as the translation provider has sufficient notice. For some variation of machine translation plus human editing, the volume can be much higher.
Establish a process for managing documents
Cross-border deals can involve hundreds of documents sent in small batches several times a day for weeks, and it’s easy to misplace documents or lose track of spending. Establish a document management process early on that includes:
- How are you sending documents to your translation provider and how are you receiving them back? If they are invited to the VDR they can download and upload. If not then file sharing tools like DropBox or WeTransfer should be set up. Avoid email as documents will surely get misplaced.
- How are you recording costs? With large volumes of documents, the translation spend will grow quickly. Ask the translation provider to publish a shared spreadsheet online (Google Sheets for example) with a running list of all documents in play and the corresponding translation price. Keep daily track of spending to avoid surprises, and use this file to check your invoices.
- Naming standard: one common method is to rename translated files with the original file name plus a language-specific suffix, e.g. “_EN” for English. When you sort by name, translations will appear next to the originals.
Get pre-approval from your client
As the deal advisor, you should obtain blanket cost approval to translate documents when and as you need them. If you need to get a quote from your translation provider approved by your client each time, you can expect significant delays.
Don’t forget Q&A
As the deal advisor, you may need to issue questions to the other party in their language and translate their responses, often covering several time zones. Plan for this: establish a process with your translation provider for when and how you will send questions and responses for translation. One model is day-of-the-week, e.g. Sunday night you send questions for translation. You receive translations on Monday morning and send them to the other party. Then Wednesday night you send the other party’s responses for translation by Thursday morning. Another model is on-demand 24×7, which will carry higher pricing.