A Kirkland, Washington-based technology company is suing its New York-based acquisition advisor, saying it was forced into a $5.2 million acquisition that was supposed to generate $1 million annually but instead required continued cash infusions to stay afloat.
The lawsuit, filed on behalf of SmartTek21a legacy technology consulting services company, accuses TGP GP Management of “severely lacking due diligence” in its May 2025 acquisition of IT Avalonanother American technology consultancy.
According to the complaintTortuga Growth Partners, a New York-based private equity firm, acquired a minority stake in SmarTek21 in 2024. Its subsidiary, TGP GP Management, a management and acquisition consultancy firm, has entered into an agreement to advise SmarTek21 on acquisitions and related matters.
TGP responded in a statement: “TGP strongly disputes the allegations in this complaint and stands by the extensive due diligence process conducted for the IT Avalon acquisition.”
The lawsuit was filed on December 18 in King County Superior Court in Seattle by Totem Lake Investments II, the majority owner of SmarTek21. Totem Lake Investments is led by the CEO of SmarTek21 Alkarim Lalji. The lawsuit seeks at least $6 million in compensatory damages, plus punitive damages and other damages.
According to the complaint, TGP almost immediately began pressuring SmarTek21 to acquire IT Avalon, as a complementary company that would complement SmarTek21’s existing model and diversify its customer base. The lawsuit says TGP claimed IT Avalon would generate at least $1 million in free cash flow annually, before other benefits from the combination.
The complaint alleges that TGP’s client Ashray Prasad SmarTek21 executives’ concerns about IT Avalon’s deteriorating finances in the days before the shutdown were dismissed. According to the lawsuit, Prasad repeatedly called Lalji and urged him to close the deal. Many of these calls were made while Lalji was being treated for a serious medical condition.
The lawsuit alleges that TGP pursued the acquisition of IT Avalon out of “enthusiasm for transaction costs, publicity and the appearance of quick deals.”
According to the lawsuit, IT Avalon’s revenues have declined since 2022 and operating revenues have declined significantly, while supplier relationships have deteriorated.
TGP structured the deal so that any working capital shortfall would be offset with future earnout payments to IT Avalon’s vendors. But that turned out to be worthless, the lawsuit alleges, because IT Avalon had virtually no chance of meeting the revenue targets that would lead to these payments.
In its statement, TGP disputed these claims.
“IT Avalon is a strong technology company with valuable customer relationships,” the company said. “The combined entity will now benefit from an expanded customer base, talented workforce and a robust pipeline of opportunities. We intend to vigorously defend against these baseless claims.”
The dispute illustrates the complicated nature of private equity-led technology roll-up strategies, which combine smaller companies to create larger platforms.
The acquisition of IT Avalon in May was the second in six months for SmarTek21, following the previous acquisition combination with Retro Rabbit, a South Africa-based product design agency, said a press release by Tortuga Growth Partners who announced the IT Avalon deal at the time.
“We are building a category-defining platform,” TGP’s Prasad, who is also a member of SmarTek21’s board of directors, said in the press release. He added that the completion of the second acquisition in that time frame “reflected the momentum behind SmarTek21’s growth.”
According to company public materials, SmarTek21 provides product engineering and enterprise software services to Fortune 250 customers in industries such as financial services, healthcare and telecom. It says it has more than 650 employees in the US, India and South Africa.
Founded in 2012, IT Avalon provides technology consulting services to clients in the financial services, healthcare, gaming and hospitality industries. The May press release announcing the deal described the company as having a 95% customer retention rate.
Lalji and SmarTek21 did not respond to requests for comment. View the full complaint below.
SmarTek21 v. TGP Management Through GeekWire
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