A major legal battle has erupted between two American technology companies over an acquisition deal that has allegedly turned sour. A Washington-based technology consulting firm, SmarTek21, has filed a lawsuit against its New York-based acquisition advisor, TGP GP Management, claiming it was pushed into a disastrous $5.2 million acquisition.
The Core of the Legal Dispute
SmarTek21, a longstanding provider of product engineering and enterprise software services to Fortune 250 clients in sectors like finance, healthcare, and telecom, took the legal step earlier this month. The lawsuit was filed in the King County Superior Court in Seattle by Totem Lake Investments II, the majority owner of SmarTek21. The company boasts a global workforce of over 650 associates across the United States, India, and South Africa.
The legal complaint centers on the May 2025 acquisition of another US tech consulting company, IT Avalon. Founded in 2012, IT Avalon serves clients in financial services, healthcare, gaming, and hospitality. SmarTek21 alleges that TGP GP Management conducted "egregiously defective due diligence" on this deal. The advisor had reportedly promised that IT Avalon would generate at least $1 million in annual free cash flow. Instead, the acquired company has required continuous cash injections merely to survive, failing to deliver the promised financial benefits.
Allegations of Pressure and Misrepresentation
The relationship between the companies began in 2024 when Tortuga Growth Partners, a New York private equity firm, acquired a minority stake in SmarTek21. Its affiliate, TGP GP Management, then entered an agreement to advise SmarTek21 on acquisitions.
The lawsuit claims that TGP almost immediately began pressuring SmarTek21 to buy IT Avalon, presenting it as a complementary business that would diversify the customer base. It further alleges that TGP's principal, Ashray Prasad, dismissed serious concerns raised by SmarTek21 executives about IT Avalon's worsening financial health just before the deal closed.
According to the suit, TGP was motivated by "enthusiasm for transaction fees, publicity, and the appearance of quick deal-making." The complaint states that IT Avalon's revenue had been declining since 2022, with operating income dropping sharply and vendor relationships deteriorating. The deal was structured so that any working capital shortfall would be deducted from future earnout payments to IT Avalon's sellers.
Seeking Damages and TGP's Firm Denial
SmarTek21 is seeking a minimum of $6 million in damages, plus punitive damages and other legal relief. In a strong rebuttal, TGP GP Management has disputed all allegations.
In an official statement, TGP said, "TGP strongly disputes the allegations in this complaint and stands by the comprehensive due diligence process conducted for the IT Avalon acquisition." The firm defended IT Avalon as "a strong technology business with valuable client relationships," arguing that the combined entity now enjoys an expanded client base, talented personnel, and a robust opportunity pipeline. TGP has vowed to vigorously defend itself against what it calls "baseless claims."
This case highlights the high-stakes risks and potential for conflict in the mergers and acquisitions landscape within the global technology consulting sector, which has significant operations and talent hubs in India.
