Canadian rival buys GBS, dismisses 35 employees

August 21, 1992|By Kim Clark | Kim Clark,Staff Writer

GBS Inc., a financial-services company in Columbia, was purchased yesterday for $1.8 million by a Canadian competitor that subsequently discharged 35 of the headquarters' 47 workers.

GBS, operating under bankruptcy court protection since early this year, was purchased by Leadley, Gunning & Culp International, a financial consulting firm with headquarters in St. Catharines, Ontario, near Niagara Falls.

With the purchase, the Canadian company has 600 financial consulting franchises in 47 states and six provinces. It is the continent's largest franchise firm specializing in small-business advice.

Workers at GBS, which blossomed from a Rockville basement into a nationwide adviser to small businesses with 400 franchises, described a scene of stunned, crying ex-employees in the parking lot outside the company's offices yesterday.

They said even GBS President Robert Pirtle was stopped at the reception desk as he walked into work about 8:30 yesterday morning and handed a sealed envelope containing a termination letter.

The workers said they were shocked because they had viewed the Canadian company as a savior for financially troubled GBS.

Last month, the two companies held a large cookout together in Centennial Park for all employees to celebrate the impending "marriage," one laid-off worker noted.

"I was practically jumping for joy" when the purchase was finally arranged this spring, an employee said.

The employee, who asked not to be identified, said her letter told her to submit a resume to the new owner if she wanted to apply for a job. She said she did not want her name revealed because she would like to work for the new company.

Robert Jason, chief financial officer of Leadley, said his company intends to keep the headquarters in Columbia but probably won't hire back all of the employees there.

Mr. Jason said his company will update GBS' computer systems and forge a compromise between GBS' and Leadley's franchise fees. He said Leadley's managers haven't decided what the company's name will be.

Leadley, a 3-year-old franchiser that went public last year, earned $315,000 on revenues of $4.2 million in 1991.

Scott Gardner, who owns a GBS franchise in Severna Park, said GBS got into trouble because for many years it focused on selling franchises, to the detriment of services to existing businesses.

He said the idea behind GBS was always strong but that as its business slowed, the company was not able to spend money researching and developing new products.

"GBS should have evolved into a major player in the franchise accounting field," he said, adding that he hoped the new marriage of the experienced GBS and the profitable Leadley would make the difference.

But for others associated with GBS, yesterday marked the final divorce decree.

Bernard Browning of Rockville started the company in his basement in 1962 when he realized that most small business people did not know enough about financial management tools and needed help with taxes.

At one point, he said, there were 1,100 businesses using the name GBS, which stands for General Business Services, and he had 120 full-time employees at the headquarters.

After 25 years, he tried to sell the company. But GBS stagnated as deals fell through. In 1989, he sold the company to its managers for $3 million in promissory notes.

But as the number of franchises dwindled, the company started laying off workers and had difficulty meeting its obligations.

Then, late last year, First American Bank sold a $1.2 million loan it had made to GBS to a Texas carpet cleaning franchiser, Don Dwyer, for $400,000. Mr. Dwyer, who owns several franchise companies, told the company he was interested in taking it over.

But GBS filed for Chapter 11 bankruptcy protection to stop Mr. Dwyer, and GBS managers searched for a "white knight" to buy the company from him. They found Leadley early in 1992 and reached an agreement in March. The bankruptcy court approved the sale last week.

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