Former IBM Government Channel Exec Invests In VAR Jeskell

The former IBM executive in charge of that company's federal government business through the channel has invested in one of his former channel partners, Jeskell, after retiring from a 31-year career at Big Blue.

That executive, Bill Gleich, pulled together a group of three investors to purchase Jeskell from FusionStorm. FusionStorm decided to sell Jeskell after a California jury said it owed $11 million to San Diego-based TIG over allegations of illegal hiring practices.

FusionStorm said it sold Jeskell, which it acquired four years ago, to the investor group for an undisclosed sum. Two of the three investors are principals of CAS Severn, a Laurel, Md.-based solution provider which does about one-third of its business with the federal government.

Gleich, who until November 5 is the manager of IBM's federal channel program, said he has been working with Jeskell since it was founded in the 1980s. He decided to invest in Jeskell and serve as its president after he heard from Dan Serpico, the president of FusionStorm, that Jeskell was for sale.

"It's scary, but exciting at the same time," he said.

Next: Bringing The New Team Together

Gleich said that when he heard from Serpico that Jeskell was for sale, he thought it was a good opportunity for him since he was already planning to retire from IBM. Therefore, he contacted Carson Soule, CEO of CAS Severn, and Doug Gerstmyer, president of CAS Severn, to discuss working together on Jeskell.

"I've known Carson and Doug a long time because they had a small federal business," he said. "They are both good manager, and they had money to invest."

Going to work at a small business after spending over 30 years at IBM will be quite a change, Gleich said.

"But with change comes development," he said. "You have to have a challenge to grow."

The fact that Jeskell is small enough to be classified as a small business was an important factor for Gleich. "The federal government is doing more with small businesses," he said.

Next: Jeskell Probably Was Not A Fire Sale

While FusionStorm moved quickly to sell Jeskell as a way to raise funds to pay TIG the nearly $11 million it owes, Gleich denied that the court case meant he and his fellow investors got Jeskell at some special discount over its market value.

"From my perspective, the motivation FusionStorm had to sell Jeskell was immaterial," he said. "We felt that Jeskell had good operations, and can continue to be a good partner with IBM. The price was set by the accounts and lawyers."

Marty Wolf, president and managing director of Martin Wolf Securities, a San Ramon, Calif.-based investment banker focusing on IT solution and IT-enabled business process outsourcing companies, said that such sales, even when done quickly, are typically governed by their value.

"The judgment may have precipitated the sale," Wolf said. "But it probably did not affect the valuation."

Wolf said that there is real investor interest in the government IT business, although this part of the market is not as hot as it was last year. Even so, he said, GTSI, a Herndon, Va.-based publicly-listed government solution provider, is currently trading at about 10 percent of its annual revenue, while direct marketers in the government market are valued about between 8 percent and 15 percent of their revenue.