A Kirkland, Wash.-based tech company is suing its New York-based acquisition advisor, alleging it was pushed into a $5.2 million acquisition that was supposed to generate $1 million annually but has instead required ongoing cash infusions just to stay afloat.

The lawsuit, filed on behalf of SmarTek21, a longtime technology consulting services firm, accuses TGP GP Management of “egregiously defective due diligence” in its May 2025 acquisition of IT Avalon, another U.S.-based tech consulting company.

According to the complaint, Tortuga Growth Partners, a New York-based private equity firm, acquired a minority stake in SmarTek21 in 2024. Its affiliate, TGP GP Management, a management and acquisition advisory firm, 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 comprehensive due diligence process conducted for the IT Avalon acquisition.”

The lawsuit was filed Dec. 18 in King County Superior Court in Seattle by Totem Lake Investments II, the majority owner of SmarTek21. Totem Lake Investments is led by SmarTek21 CEO Alkarim Lalji. The suit seeks at least $6 million in damages, plus punitive damages and other relief.

According to the complaint, TGP almost immediately began pressuring SmarTek21 to acquire IT Avalon, as a complementary business that would augment SmarTek21’s existing model and diversify its customer base. The suit says TGP represented that IT Avalon would generate at least $1 million annually in free cash flow, before other benefits from the combination.

The complaint alleges that TGP’s principal Ashray Prasad dismissed concerns raised by SmarTek21 executives about IT Avalon’s deteriorating finances in the days before closing. According to the suit, Prasad repeatedly called Lalji urging him to close the deal — placing many of these calls while Lalji was undergoing treatment for a serious medical condition.

The lawsuit alleges TGP pursued the IT Avalon acquisition out of “enthusiasm for transaction fees, publicity, and the appearance of quick deal-making.”

According to the suit, IT Avalon’s revenue had been declining since 2022, and its operating income had dropped significantly, while its vendor relationships deteriorated.

TGP structured the deal so that any working capital shortfall would be offset against future earnout payments to IT Avalon’s sellers. But that proved worthless, the suit alleges, because IT Avalon had almost no chance of hitting the revenue targets that would trigger those payments.

In its statement, TGP disputed these claims.

“IT Avalon is a strong technology business with valuable client relationships,” it said. “The combined entity now benefits from an expanded client base, talented personnel, 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, in which smaller companies are combined to create larger platforms.

The acquisition of IT Avalon in May was the second in six months for SmarTek21, following its earlier combination with Retro Rabbit, a South Africa-based product design firm, according to a press release by Tortuga Growth Partners announcing the IT Avalon deal at the time.

“We are building a category-defining platform,” said TGP’s Prasad, who is also a member of SmarTek21’s board of managers, in the press release. He added that the completion of the second acquisition over that time frame reflected “the momentum behind SmarTek21’s growth.”

According to the company’s public materials, SmarTek21 provides product engineering and enterprise software services to Fortune 250 clients in industries including financial services, healthcare, and telecom. It says it has more than 650 associates across the U.S., India, and South Africa.

IT Avalon, founded in 2012, provides technology consulting services to clients in financial services, healthcare, gaming, and hospitality. The May press release announcing the deal described the company as having a 95% client retention rate.

Lalji and SmarTek21 did not respond to requests for comment. See the full complaint below.

SmarTek21 v. TGP Management by GeekWire