The Perilous Path of Tech Acquisitions: SmarTek21’s $5.2 Million Dispute

In the high-stakes world of technology acquisitions, due diligence can mean the difference between prosperity and financial disaster. This reality is playing out in a contentious legal battle between Kirkland, Washington-based SmarTek21 and its New York acquisition advisor, TGP GP Management. The lawsuit, filed in December 2025 in King County Superior Court, offers a sobering glimpse into the complexities and potential pitfalls of private equity-backed technology roll-up strategies. SmarTek21, a veteran technology consulting services firm, alleges it was pressured into a $5.2 million acquisition of IT Avalon that was presented as a financial boon but has instead become a significant financial burden. The company claims the acquisition, which was supposed to generate $1 million annually in free cash flow, now requires continuous cash infusions just to remain operational. The lawsuit seeks at least $6 million in damages, plus punitive damages, highlighting the substantial financial impact of what SmarTek21 characterizes as “egregiously defective due diligence.”

The dispute traces back to 2024 when Tortuga Growth Partners, a New York-based private equity firm, acquired a minority stake in SmarTek21. Following this investment, Tortuga’s affiliate, TGP GP Management, entered into an advisory agreement with SmarTek21 to guide the company through potential acquisitions. According to the complaint, TGP almost immediately began pushing SmarTek21 to acquire IT Avalon, presenting it as a complementary business that would enhance SmarTek21’s existing model and diversify its customer base. The lawsuit paints a picture of mounting pressure from TGP, particularly from principal Ashray Prasad, who allegedly dismissed concerns raised by SmarTek21 executives about IT Avalon’s deteriorating finances in the days leading up to closing. Perhaps most troublingly, the suit claims Prasad repeatedly called SmarTek21 CEO Alkarim Lalji urging him to close the deal while Lalji was undergoing treatment for a serious medical condition, suggesting an aggressive push to complete the transaction regardless of emerging red flags.

The heart of the dispute centers on what SmarTek21 describes as fundamentally flawed due diligence. The lawsuit alleges that IT Avalon’s financial situation was far more precarious than represented, with revenue declining since 2022, operating income dropping significantly, and vendor relationships deteriorating. Despite TGP structuring the deal so that any working capital shortfall would be offset against future earnout payments to IT Avalon’s sellers, SmarTek21 claims this protection was effectively worthless because IT Avalon had virtually no chance of hitting the revenue targets that would trigger those payments. This mismatch between the rosy financial picture painted during acquisition talks and the subsequent reality has left SmarTek21 in a difficult position, forced to inject additional capital into a struggling subsidiary rather than enjoying the promised financial benefits. The lawsuit further alleges that TGP’s motivations for pursuing the deal were less about creating value for SmarTek21 and more about securing “transaction fees, publicity, and the appearance of quick deal-making,” suggesting a fundamental misalignment of interests.

TGP has forcefully rejected these allegations, stating, “TGP strongly disputes the allegations in this complaint and stands by the comprehensive due diligence process conducted for the IT Avalon acquisition.” In their defense, TGP portrays IT Avalon as “a strong technology business with valuable client relationships” and maintains that “the combined entity now benefits from an expanded client base, talented personnel, and a robust pipeline of opportunities.” This stark contrast between SmarTek21’s allegations and TGP’s response highlights the subjective nature of business valuations and the challenges inherent in predicting post-acquisition performance. The public materials from both companies paint different pictures: SmarTek21 describes itself as providing product engineering and enterprise software services to Fortune 250 clients across multiple industries, with over 650 associates across the U.S., India, and South Africa, while IT Avalon, founded in 2012, was portrayed in the acquisition announcement as having an impressive 95% client retention rate in its technology consulting services for financial services, healthcare, gaming, and hospitality clients.

The dispute illuminates the complicated dynamics of private equity-led technology roll-up strategies, where smaller companies are consolidated to create larger platforms with enhanced capabilities and market reach. The IT Avalon acquisition in May 2025 was actually SmarTek21’s second acquisition in a six-month period, following its earlier combination with Retro Rabbit, a South Africa-based product design firm. At the time, TGP’s Prasad, who also serves as a member of SmarTek21’s board of managers, heralded these moves as evidence of “building a category-defining platform” and reflecting “the momentum behind SmarTek21’s growth.” The current lawsuit casts a shadow over these ambitious expansion plans, raising questions about the sustainability and wisdom of rapid acquisition strategies when thorough due diligence might be compromised in the rush to close deals and demonstrate growth momentum.

As the legal battle unfolds, this case offers valuable lessons for technology companies considering acquisitions, particularly those working with external advisors. The importance of comprehensive, independent due diligence cannot be overstated, nor can the need for clear alignment of interests between advisors and their clients. For SmarTek21 and TGP, the coming months will determine whether this dispute will be resolved through court proceedings or settlement negotiations. Whatever the outcome, the case serves as a cautionary tale about the risks inherent in technology acquisitions and the potential consequences when reality fails to match pre-acquisition promises. As neither Lalji nor SmarTek21 responded to requests for comment beyond the filed complaint, and with TGP vowing to “vigorously defend against these baseless claims,” the technology industry will be watching closely to see how this high-stakes dispute ultimately resolves and what precedents it might set for future acquisition advisory relationships in the fast-moving world of technology consolidation.