After AppDirect Sale, TBI, Shepstone Reckon with Layoffs Fallout
… evaluate his options. He told employees on a companywide call that he was weighing potential offers and would make a decision that most benefited employees, according to sources.
Many potential buyers kicked the tires on an acquisition, but sources said AppDirect, Avant investor Pamlico Capital, Ingram Micro, ScanSource and Telarus investor Columbia Capital were the ones that engaged in serious talks. And by the end of 2022, those talks were getting more serious. Last fall Shepstone told the company that two particular buyers were eyeing it and would be visiting the Chicago office, a source said.
The first workforce reductions took place after the company’s Christmas party, multiple sources confirmed. About a dozen people were laid off, due in part to areas of the company that had slowed down. For example, project managers got pink slips because projects had frozen, a source told Channel Futures.
Shepstone went on to assure remaining employees on a conference call that they would stay at the company that would acquire TBI. However, more bloodletting came, with dozens more positions eliminated in the days leading up to the acquisition.
Other Suitors
According to sources, all of the suitors except for AppDirect had backed out of the process. Some of the others told Channel Futures privately that they couldn’t take on TBI’s payroll, knowing that the ensuing mass layoffs would damage their reputation among partners.
Although a steady stream of employees had left the company of their own accord in the last year, the TBI employee roster remained bloated, sources told Channel Futures.
“I think that [bloating] became more so, as the worst kept secret was being more public, and most certainly involved a downturn in business,” a source said. “Bloating also became a factor due to overhiring, but also lacking the true investment and innovation in channel quickly and effectively.”
Multiple sources close to the matter indicated that the final offer from AppDirect was approximately $65 million, almost half of what Shepstone was seeking. Part of the deal is reportedly performance-based, meaning that Shepstone is in line for another payment down the line. He now serves as a strategic advisor to AppDirect.
Shepstone, the sole proprietor of TBI, did not respond to questions from Channel Futures about the transaction or the layoffs.
However, Shepstone told TBI partners on a recent webinar that he chose AppDirect because he did not want to align with private equity. He described the buyer as a “safe harbor” that would not seek to flip its investments in the short term. Caisse de Dépôt et Placement du Québec (CDPQ), one of AppDirect’s largest funders, is not a private equity firm but rather an institutional investor with a history of long-term investments.
‘Get It in Writing’
Laid off TBI employees reported feeling “strung along” by expectations of assurances that they would get a financial piece of the deal.
Shepstone in the months leading up to the acquisition told employees that TBI would offer a profit-sharing program in the event of a transaction. Multiple sources within the company confirmed that Shepstone on at least two occasions made those claims on companywide conference calls.
Shepstone also made promises of equity to members of the senior leadership, and for many of the company’s recent SVP hires, the promise of equity factored heavily into their decision to join the company. Those promises of a lucrative buyout package even came to employees further down the org chart to the manager level, according to sources.
Former TBI employees tell Channel Futures that they took these verbal promises seriously. In many cases, they turned down job offers – many of which paid better – in hopes of seeing things through to the end.
But no profit-sharing program came to fruition. And virtually none of the employees below the senior leadership level saw any payout package. On the contrary, many who held closely to Shepstone’s promises found themselves out of a job.
From their perspective, they had been chasing a dangling carrot …