After to Sale to AppDirect, TBI, Shepstone Reckon with Layoffs Fallout

After AppDirect Sale, TBI, Shepstone Reckon with Layoffs Fallout

Written by James Anderson
February 16, 2023

“If anyone promises you equity, get it in writing,” a former TBI employee told Channel Futures.

The long-expected sale of TBI to AppDirect has garnered celebrations from those involved in the deal and those who will participate in the combined company. It’s another story, however, for the employees the company left behind.

Earlier this month AppDirect announced the acquisition of TBI, one of the channel’s last-standing independently owned national technology services distributors (TSDs). The deal, which closed upon its public announcement, marks a significant win for the B2B subscription commerce provider’s efforts to gain market share in the TSD market, improve its telecom expertise and ultimately drive adoption of its “relationship-based marketplace.”

TBI’s Geoffrey Shepstone

For TBI owner Geoffrey Shepstone and many members of his senior leadership team, the acquisition meant a large — though lower than expected — payout and a job at AppDirect going forward. But for the dozens of TBI employees laid off prior to the acquisition, their exit reportedly came as a shock.

Channel Futures reported that at least 58 people had been laid off in two separate workforce reductions prior to the closing of the deal. Other estimates in the past week have put that number even higher. TBI last year disclosed to the Chicago Tribune that it employed 230 U.S. workers. AppDirect did not provide an official number of people who joined AppDirect from the TBI side, but sources indicate it is closer to 150. Sources have clarified that a sizable portion of employees left TBI of their own accord in the last year.

The cuts ranged from executive leadership team members all the way down to the individual contributor level.

Most acquisitions involve layoffs, especially when merging entities carry duplicate positions as AppDirect and TBI did. Moreover, layoffs at the seller’s company may occur before the parties officially ink the sale. However, terminated TBI employees who shared their stories with Channel Futures criticized company leadership for how they primed their expectations leading up to the transaction.

You can find all of Channel Futures’ AppDirect-TBI merger coverage here.

Former TBI Employees Speak

Former employees speaking on background or off the record with Channel Futures say they felt blindsided by the layoffs. Many say TBI verbally promised a share of the acquisition proceeds. According to sources, TBI owner and president Geoff Shepstone gave multiple spoken promises of a profit-sharing program in companywide conference calls but ultimately did not follow through on them, due in part to a lower valuation that he accepted from AppDirect.

AppDirect through a spokesperson declined to comment on this story, and Shepstone also declined to comment. Multiple affected employees spoke to Channel Futures on background. They all requested anonymity for fear of repercussion.

Many spoke positively of their time at TBI, describing their respective departments as a second family with which they wanted to finish out their careers. It was their commitment to the company’s mission and their hope that the company would reward them that made TBI’s layoffs more painful.

Other sources say Shepstone’s loyalty to his employees led to the company keeping an oversized payroll that ultimately no buyer would accept without drastic cutbacks. He had reportedly refused to conduct significant layoffs over the years.

“You’re damned if you do and damned if you don’t,” a source close to Shepstone said.

Timeline

When private equity investors converged on the TSD market two years ago, Shepstone and his senior leadership team made the vow that they would not sell to a private equity firm. While the teams at Telarus, Avant and Bridgepointe celebrated deals with respective buyers, TBI took a decidedly contrarian approach.

TBI executives remarked to Channel Futures at the time that they believed many agents were choosing to do business with them because of the Chicago-based company’s independent streak.