Deal gone wrong: US tech company drags acquisition adviser to court; alleges fee-driven bad advice
A tech firm, SmarTek21, is suing its advisor, TGP GP Management, alleging it was misled into a $5.2 million acquisition of IT Avalon. SmarTek21 claims TGP rushed the deal despite concerns about IT Avalon's finances, which have since required significant cash infusions. TGP, however, denies the allegations, asserting thorough due diligence and a strong business outlook for the combined entity.
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Two American technology companies are fighting over an acquisition, supposedly gone wrong. According to a report in Geekwire, a Washington-based tech company SmarTek21 has sued its New York-based acquisition advisor, TGP GP Management, alleging that it was pushed into a $5.2 million acquisition.
SmarTek21 is a longtime technology consulting services company that provides product engineering and enterprise software services to Fortune 250 clients in industries including financial services, healthcare, and telecom. It claims to have more than 650 associates across the US, India, and South Africa. The lawsuit was filed earlier this month in King County Superior Court in Seattle by Totem Lake Investments II, the majority owner of SmarTek21. In its complaint, the lawsuit accuses TGP GP Management of “egregiously defective due diligence” in its May 2025 acquisition of IT Avalon, another US-based tech consulting company, that was supposed to generate $1 million annually but has instead required ongoing cash infusions just to stay afloat. Founded in 2012, IT Avalon offers technology consulting services to clients in financial services, healthcare, gaming, and hospitality.
According to the complaint, Tortuga Growth Partners, a New York-based private equity company, acquired a minority stake in SmarTek21 in 2024. Its affiliate, TGP GP Management, a management and acquisition advisory company, entered into an agreement to advise SmarTek21 on acquisitions and related matters. It further claims that 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. 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 is said to have structured the deal so that any working capital shortfall would be offset against future earnout payments to IT Avalon’s sellers. The lawsuit seeks at least $6 million in damages, plus punitive damages and other relief.
What advisory company TGP GP Management said on the lawsuit
In its statement, TGP disputed these claims. TGP said, “TGP strongly disputes the allegations in this complaint and stands by the comprehensive due diligence process conducted for the IT Avalon acquisition.”“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.”