When you consider the Scansource NewCo uproar, you have to look at the landscape where TSBs are soft on transparency.
All of the PE-backed TSBs have bought bases. If they aren’t actively farming those bases directly, then what did they buy the bases for?
They don’t really talk about that.
They say they invest in partner businesses to help them grow, but that transaction also ties the partner to do business with that one TSB, instead of maybe spreading it around.
I get messages often from principals telling me that everything is fine and that no one is beholden to anyone. I present exhibit A:
This is from a SEC filing by AB Private Credit Investors Corp. “AB Private Credit Investors is the $18.5+ billion direct lending platform of AllianceBernstein. We provide flexible financing solutions primarily to private equity–backed companies and directly to private equity funds managed by leading sponsors.” Sometimes when a PE investor pledges $100M they spread the money out to several entities. In this case, Exhibit 2 shows the Delayed Draw Term Loans for Avant and Bridgepointe:
Some times DDTL have complex terms according to Swoop. Regardless, the maturity on these loans are 2026 for Avant and 2027 for BDGPT. $5M and $10M respectively with at least 7% interest plus fees. FYI, annual interest on $5M is $350K.
If you want the latest 10Q, go HERE to page 10. Avant has $15M out at 11.29%! Bridgepointe has 7 loans out for $19.5M at 12%.
Maybe the principals have control, but they are on the hook for paying it all back in 2-3 years. With declining ARPU on networking and UCaaS, how optimistic is that?
That’s just 2 areas of TSB business that lacks any transparency.
Consider that a partner’s whole income stream is on a contract that the TSB holds that the partner has never seen? Remember before the M&A, when you would place an order only to find out that the TSB didn’t hold paper on that vendor directly? They went through a different TSB or the Agent Alliance for that contract? So your commission depended on many factors working out?
Where was the transparency to partners that at least one TSB had vendors paying SPIFFs to their Channel Managers directly? Or that the Channel Managers aren’t employees, but 1099 contractors on commission only – and with their own side hustle/agency?!
The TSB execs have a distaste for what they call revenue share. That is when a partner puts deals in whatever TSB he feels like. The partners spread out their own risk. In other words, don’t put all your business with any single TSB, just in case! [Note: partners remember Keane and the TNCI clusters.]
The TSB execs make it sound like the partner is abusing the TSB’s resources. For example, I use an SE and CM at Intelisys to get my quotes and answers, then shop that deal over to AppDirect. More likely, the partner used a quote tool to get a quote and then leveraged the vendor’s CM and SE. Guess what? For some carriers, the CM and SE are the same across TSBs.
What the TSB execs are really saying is that they thought by now they would have exclusivity with more partners, but it hasn’t worked out that way – and they are mad about it.
All the tools and noise and parties haven’t resulted in 100% loyalty. Go figure.
I am transparent about how I do business with TSBs. [You can read about it right here!] Yet the TSBs aren’t really transparent about a lot of their business – and partners are just supposed to be okay with that.
That’s the way it is, but don’t say stupid stuff about one TSB, when in fact your own TSB has similar practices.