For someone who has made a fortune trading in words, Liz Elting can be remarkably tight-lipped. But the 50-year-old co-founder of TransPerfect, one of the world’s largest translation firms, is acting under lawyers’ orders. Her attorneys don’t want her saying much about the messy corporate divorce she’s been embroiled in with her co-CEO and one-time fiancé, Phil Shawe. Nor do they want reporters at TransPerfect’s Park Avenue headquarters, where she shares a floor with Shawe, the day before she’s due to face him in a Delaware court over the future of their company.
That’s why, on a Tuesday morning in late April, Elting is perched on a leather chair in her all-white living room on Manhattan’s Upper East Side. A trim brunette in a navy-blue skirt suit, she has the energy of a slight, skittish bird.
“TransPerfect is my brainchild, my baby,” she says. “I’d like to own this company and be part of its future.”
Elting and Shawe built the company from a dorm-room startup to a global leader with $505 million in sales. But tensions between them flared up five years ago, spilling into legal battles in two states with mortifying episodes of infighting. There was Shawe charging the petite Elting with battery by high heel, his breaking into her office and stealing her confidential emails with attorneys, and F-bombs galore. Despite an astonishingly acrimonious relationship, the ex-lovers have thrived as business partners, and out of their dysfunction has grown a company that has, ironically, solved one of the world’s biggest problems—how to communicate better.
Elting, who owns half of TransPerfect, has an estimated net worth of $390 million, landing her on Forbes’s list of America’s Richest Self-Made Women for the second time. But TransPerfect’s unbroken two-decade growth streak could all come undone if the two are forced to sell the company in a saga that has careened from bedroom to boardroom to courtroom.
The idea of TransPerfect was born 24 years ago, after Elting received an MBA at the Stern School of Business at New York University. She had always been a linguaphile. By high school she’d lived in three countries and had studied French, Portuguese, Spanish and Latin. Her parents, a teacher and an advertising executive, urged her to work from age 10. She babysat, delivered newspapers and manned a dry-cleaning shop. At Trinity College, where she majored in modern languages and literature, Elting cleared dining hall trays and worked overnight security.
After graduating in 1987 and jetting to Caracas for a finance internship, Elting joined Euramerica (which later became part of Berlitz), then the best-known translation firm in an industry of mom-and-pop shops. With the personal computing revolution and economic globalisation taking off, demand was booming. “It looked to me like they were going to change the world,” Elting says.
After three years she thought she could be the one to do that. Clients wanted things done faster, more professionally and in more formats. She envisioned a company with offices around the world and the service level of a top-tier bank or law firm. “I can be a pioneer in this industry,” she thought.
Elting enrolled in business school to hone her entrepreneurial skills. In her second year she started dating Shawe, a round-faced 22-year-old with a mop of black hair. He was a year behind her at Stern, and she moved into his dorm room after graduating.
Believing she needed more business experience, Elting joined the proprietary trading division of a French bank, where she was one of the few women. She quit after six weeks. “I was putting numbers in a spreadsheet, and whenever the phone rang, everyone would yell across the office, ‘Liz, phone!’ My heart wasn’t in it,” she says.
Unemployed at 26, Elting decided she had nothing to lose. In 1992 she took out $5,000 she had saved, got a $5,000 credit card advance and asked Shawe to start a company with her. (Shawe says he ran up $80,000 in credit card debt to fund the business, which Elting disputes.) “I thought it would be nice to do it with a partner. And he was my boyfriend, so that was a factor,” she says.
The sweethearts agreed to split the business 50-50 (although Shawe later transferred 1 percent to his mother, Shirley). They didn’t set an exit strategy.
With a fax machine, a phone and a rented computer, the couple made and wrote hundreds of calls and letters daily, offering anything businesses needed in a foreign language faster and better than competitors. Their first job was translating a legal document from English to Slovak. From the beginning, Elting and Shawe outsourced the language work to highly-specialised freelancers, while putting in 100-hour weeks running the company from Shawe’s dorm room.
Their personalities were complementary—he was the risk-taker, she the analytical one. But, as couples do, they also bickered. “Day in and day out, there were all kinds of things we disagreed on,” Elting says. “There are times when it’s been better than others.”
After seven months in business, the pair moved to an office suite. A year later they hired their first employee and reeled in their first million-dollar client, JC Penney. By 1996 they had opened TransPerfect’s current New York headquarters, along with offices in San Francisco, Atlanta and Washington, DC.
They also got engaged, but Elting broke it off a year later. Shawe didn’t take the split well. At one point, in anger, he even hid under her bed, Elting later told a Delaware court. Elting also testified that he did the same thing several years later when he surprised her in her hotel room in Argentina on a business trip. Elting also claimed Shawe came uninvited (with his mother) to her 1999 wedding in Jamaica to Michael Burlant, a lawyer turned real estate broker whom she had first dated after college (and with whom she now has two teenage children). Shawe didn’t deny the actions in court, according to an August 2015 opinion from Delaware Chancery Court Chancellor Andre Bouchard. (Through a spokesman, Shawe told Forbes that he has never crawled under a bed, was not in Argentina at the same time as Elting and was invited to her wedding.)
Despite their breakup, Elting and Shawe kept working together. “The company was like a child,” she says. “Neither of us wanted to walk away.”
TransPerfect grew up fast. In 1998, the firm hit $10 million in sales and started opening offices abroad. The following year the company launched Translations.com with several million dollars in outside investment to meet demand for software and website translations. Shawe oversaw the digital business while Elting ran TransPerfect until 2004, when they bought out investors and merged the companies. By then, revenues were $50 million.
The company went on to open a handful of offices a year and aggressively added services, including litigation support, remote interpreting and general staffing. The firm invested early in digital translation tools that improved efficiency and in high-growth specialties, such as law, finance and life sciences. They created an enticing compensation model for salespeople, with commissions that never sunset.
Recently, a key factor driving growth has been TransPerfect’s GlobalLink technology, a platform that plugs into the back end of clients’ content systems and works with any language-services provider.
Ninety percent of growth was organic, but TransPerfect also acquired more than 20 companies, mostly for talent or technology. Eventually it added capabilities in 170 languages through a network of 15,000 freelancers, many of whom are translators. Today it has about 4,000 full-time employees in more than 90 cities.
LIZ Elting and Phil Shawe never drew up a buy-sell agreement or cemented their roles on paper, and their duties have shifted over the years. Recently she has led the divisions that oversee document translation and interpreting, while he handles website and software localisation. Staff in accounting, operations, HR and other “shared services” report to both.
The co-CEOs agreed they didn’t want to go public or entertain the calls of private equity firms. “We liked the freedom, being able to focus on the long-term vision and the lack of other decision makers,” Elting says.
By 2011, the firm had $300 million in revenues and 2,000 employees around the world. But at the top, the relationship was turning ugly. Early in the year, Elting got upset with Shawe for what she considered “self-indulgent” expenses, including using corporate frequent-flier miles for a plane ticket for his fiancée, according to the Delaware opinion.
Your priorities are all wrong now, and we’re not meant to be business partners,” she wrote in an email. “[Let me know] how much you want to buy me out for—I’d like to make this amicable.”
Instead, what ensued was a series of events that Bouchard, the Delaware court chancellor, called “temper tantrums” over hires, new offices and management strategies. In early 2012, Elting poured a bottle of water on Shawe when he wouldn’t leave her office, according to an affidavit from CFO Steve Tondera in a separate dispute. (Elting says the account “is not accurate”.) When Elting questioned whether a new office in France made sense, Shawe responded via email: “Relent … or I will dismantle this place starting today.”
By late 2012, Elting and Shawe were fighting almost daily. Bouchard’s opinion details a litany of bad behaviour: Each started holding up approvals for matters such as raises, profit distributions and acquisitions unless their own proposals got a green light. Shawe especially bristled at “dual approvals”, which he claimed was a new policy Elting instated in December 2012, requiring both to sign off on routine decisions. “I will simply create constant pain until we go back to the old way of doing things,” he wrote in an email to a senior executive. After Shawe held a meeting of top managers on a date Elting couldn’t make, she announced a blanket freeze on acquisitions.
Things got even nastier after Shawe learned that Elting had lawyered up. He started intercepting her mail and tracking her phone calls. On New Year’s Eve 2013 he broke into Elting’s locked office and mirrored her hard drive, then accessed her computer remotely at least 20 times. This allowed him to capture 19,000 of Elting’s personal emails, including 12,000 privileged communications with her attorneys. In 2014, Shawe co-opted the firm’s outside counsel to represent him personally, unilaterally hired at least ten employees for shared divisions by falsifying records and put through raises without Elting’s approval, the court opinion said.
By early 2014, Shawe had had enough. He offered Elting $150 million for her stake in the company, she testified, $100 million of which would be in cash; Elting responded with a
$300 million all-cash offer, with a letter from Goldman Sachs saying it was “highly interested” in financing the deal. Neither bit.
In May 2014, the drama finally reached the courtroom. Elting sued Shawe in New York State Supreme Court, seeking to remove him as director, and in Chancery Court in Delaware, where TransPerfect’s parent company is incorporated, asking to have the company dissolved and a custodian appointed. Shawe sued Elting in Delaware for waste, breach of fiduciary duty, unjust enrichment and other claims.
But the personal drama continued. In June of that year, Shawe came to Elting’s office to confront her about a tax distribution he said was unauthorised. He refused to leave and blocked the door with his shoe, so she “tried to move it with [my] foot,” Elting wrote to colleagues the next day. Shawe filed a police report about a “domestic” assault, but her lawyers intervened to prevent her arrest; no charges were filed, and the case was later closed. He then filed a civil suit, accusing her of assault and battery by shoving him and kicking him twice on the leg with “dress shoes that were pointed at the toe”.
“It’s heartbreaking and surreal. [Shawe’s] retaliating big time because I had to pursue legal action and I want out,” Elting wrote to a friend. (In court she claimed that she wanted only to break off the relationship with Shawe, not get out of the company.) Elting called his accusations “a work of pure fiction” in a July 2014 affidavit, and she has countersued for defamation and assault. (The case remains open.)
In August 2014 a New York State Supreme Court judge ruled against Elting, declining to remove Shawe as director because he didn’t see material harm. “It is not clear who drew first blood,” the judge wrote. The following month Shawe issued a company press release without Elting’s approval, dubbing her a “minority shareholder”, calling the ruling a “major victory” and falsely quoting her as “extremely pleased”. (Bouchard eventually issued a temporary restraining order preventing Shawe from speaking for TransPerfect without Elting’s consent.)
In December 2014, Shawe’s ploys reached new heights. Elting boarded a red-eye to Paris—and discovered Shawe sitting across the aisle. He claimed to be surprised but in court admitted it was no accident after it emerged that he had texted colleagues: “Was next to Liz on the plane to Paris and she switched seats ;).” In his opinion, Bouchard noted that “the smiley-face emoticon at the end of his text message suggests he was amused by yet another opportunity to harass Elting.”
In March 2015, the court appointed corporate attorney Robert Pincus to mediate. Shawe made new offers of up to $280 million for Elting’s stake, and a group led by four senior managers bid $170 million for half of the company, but talks failed. Five months later, citing “irretrievable deadlocks” and “complete and utter dysfunction”, Bouchard made a decision that was unusual for a growing enterprise: He ordered Pincus to oversee a sale that would keep the company intact and maximise value for shareholders. He deemed it unfair to leave Elting with no choice but to sell her stake since Shawe’s actions made it less likely that an outsider would pay a fair price: “What rational person would want to step into Elting’s shoes to partner with someone willing to ‘cause constant pain’ and ‘go the distance’ to get his way?” Bouchard wrote in his decision, which also dismissed Shawe’s claims against Elting.
Shawe disagrees with the Delaware court’s conclusion that their disputes were irreparable. “We’re just passionate people, and this is the way we make decisions all the time. Nothing changed at the company—the deadlock and dysfunction are manufactured,” he says. “It’s basically a government takeover.” Former New York mayor Rudy Giuliani, an ex-US Attorney, seemed to agree when he recently weighed in on the TransPerfect saga, telling a local paper that the decision was “a very intrusive ruling in terms of the free market”.
In late April the courtroom scene in Wilmington, Delaware felt like a grim version of the wedding Elting and Shawe never had. Each side filled the rows with more than a dozen lawyers, with Shawe’s mother, a polished blonde who looks like Faye Dunaway, in the front. Shawe wore a gray pinstripe suit and baby-blue tie; Elting wore black. Her lawyers spent the first half of the day arguing that Shawe should pay all her attorney fees because of his behaviour during trial, including deleting files from his computer after a discovery order, having his phone thrown out after a curious incident involving a Coke and a rat, and lying in “every known form of testimony”. (“Liz’s lawyers often take things out of context and twist them for their own purposes,” Shawe’s attorney Martin Russo said of the perjury allegation.) At the hearing, Shawe’s lawyers claimed he’d deleted files to protect personal information and backed them up, and that no relevant evidence was lost.
After lunch, Jennifer Voss, the attorney for mediator Robert Pincus, laid out his plan for selling the company: A modified auction allowing bids from both the owners and third parties. To avoid conflicts of interest, Pincus offered to take charge of the sale side. He wanted broad discretion to determine who could bid, which advisors to retain and, most controversially, whether to impose non-compete agreements. Pincus, who has a square jaw and perennial smirk, sat behind Elting.
John Hardiman, one of Shawe’s attorneys, repeated claims that Shawe had made elsewhere: “Ms. Elting, it appears, would prefer to sell … [for] a headline price.” He went on: “Mr. Shawe has been more active in managing this business and keeping this employment team together than Ms. Elting has.” She rolled her eyes.
Bouchard closed with a reflection. “Most of these cases settle because at some point most businesspeople get rational,” he said. “I’d hope that you have one more productive exercise at trying to reach an acceptable resolution. I realise there’s less than a 0.01 percent chance that’ll happen.”
Yet Shawe says he took those comments to heart. A week after the hearing, he offered Elting $300 million for her stake in the company. “I never wanted to be a buyer or seller of this business—I just wanted to keep running it and running it well,” he says. “Settlement is always better than a government-imposed solution.”
Elting says she’s not interested: “I’ve let the custodian know that I would pay more.”
She insists she’s not looking to cash in and get out, despite asking to be bought out in the past. She says she will bid for Shawe’s stake, likely with backing from a private equity firm, and notes that she has outbid him in the past. “I’ve always wanted to stay and own this company, but I wouldn’t be a rational person if I didn’t look at being both a buyer and a seller,” she says. “I’d love to own this company and take it to the next level.”
As for her contributions to TransPerfect, at trial Elting pointed out that divisions she oversaw grew by $55 million in 2014, while Shawe’s grew by $14 million, and that hers were more profitable. Russo counters that Shawe oversaw some major projects in Elting’s division that year.
If Elting gains sole control of TransPerfect, she could face steep challenges. Several senior managers told Forbes they adamantly oppose her taking over the company. According to the Delaware opinion, Elting wants to terminate four top executives because they followed only Shawe’s orders. More than 100 employees, many of whom reported to Shawe, also signed affidavits supporting him in Elting’s New York suit (CTO Mark Hagerty called him TransPerfect’s “Steve Jobs”). Numerous employees testified on Shawe’s behalf in the Delaware suit, and 610 signed a letter to Bouchard opposing a forced sale and management change. Several managers have said they thought the conflict was already hurting morale and causing employees to jump ship, according to court records.
“The clear leader for me is Phil,” says Martha Geller, vice president of strategic accounts at TransPerfect’s digital business, who reports to Shawe and was Elting’s supervisor at Euramerica. “It’s sort of who deserves to be more of a parent: The one that nurtured you and bandaged your knee, or the biological one? I don’t see her participation as much.”
Kyle Osborne, who was vice president of sales at TransPerfect’s legal division from 2004 to 2012 and reported to both co-founders, disagrees. “Liz was definitely as big a part of the company as he was, and she had to give her blessing for everything,” he says.
Elting claims that employees haven’t sung her praises publicly because she’s tried to keep them out of the conflict. “The company will be in a great place if I own it, and I’m not worried about any valuable employees leaving.” Shawe denies lobbying employees to align with him. (Bouchard wrote in his opinion that at least two senior managers “expressed seemingly genuine concern” that Shawe would impose monetary fines on them if they brought up the fact that the conflict posed a problem for the business.) Some employees believe Shawe may be more familiar to the staff because he has a more outgoing management style and spends much more time travelling to various offices.
Even though it’s not unusual in any company sale, multiple high-level departures could put off outside bidders. “That would definitely be a deal-breaker for us,” says Andrew Brode, executive chairman of UK-based RWS Group, one of TransPerfect’s main competitors. He says RWS Group would “look closely” at bidding for TransPerfect if the standout profits it reports—Ebitda near $80 million in 2015—hold up when audited financials appear later this year.
If it went to auction, TransPerfect could bring between $800 million and $1.2 billion, based on court testimony from financial experts. Martin Russo, Shawe’s lawyer, calls that range “rosy and high”, but Don DePalma, who tracks the translation industry for Common Sense Advisory, believes it’s realistic. “We could end up with a barbarians-at-the-gate scenario, with things being bet up enormously,” he says.
DePalma says private equity firms and other investors have increasingly salivated over the translation industry, which he estimates is worth $38 billion and will grow to $50 billion by 2019. TransPerfect is an attractive buy—no debt, plenty of cash and 11,000 clients, including Google, Merck and Wal-Mart. It has increased revenues at an average of 22 percent annually in the past decade despite recession, litigation and no acquisitions since 2013. (By comparison, Lionbridge, the only language-services provider bigger than TransPerfect, grew an average of 11 percent a year over that same period.) If the trend continues, TransPerfect will cross the $1 billion revenue mark by 2019 and eventually become the industry’s biggest player.
“I have a level of disbelief,” DePalma says of TransPerfect’s recent performance. “The market has given them a pass.”
Not completely. Major clients, including Bank of America, Procter & Gamble and Shell Oil, have expressed concerns, and Lionbridge solicited TransPerfect’s clients, according to the Delaware opinion. Elting has claimed Johnson & Johnson declined to increase its business with TransPerfect because of the feud. (Russo disputes this.)
Many clients seem unfazed by the turmoil. As Rocio Haskell, a multicultural marketing manager for Dentegra, a dental insurance company that has worked with TransPerfect for three years, notes, “What happens at the senior level didn’t affect the service I received or my day-to-day working relationship with my account manager.”
Meanwhile, business goes on. Weeks before the April hearing, Elting and Shawe shared a stage in Barcelona handing out awards to top TransPerfect employees. They attend many of the same meetings with managers. Lately, with Pincus acting as a third director, things have actually been fairly civil. “We’re not out there bowling,” Shawe says.
If Bouchard finalises his forced-sale ruling or imposes substantial sanctions against Shawe in June, he says he will likely appeal, a process that could extend through the end of the year. If an auction proceeds, Shawe says he’ll make an offer.
Whatever the outcome, Elting prefers it to the uncivil war. “It’s time for a change,” she says, sounding like a weary parent. “Our child has grown up.”