Carlyle Alumni Amass $1.2 Billion for Defense, Aerospace Bets

Brooke Coburn and Adam Palmer founded Capitol Meridian in 2021

Firm is targeting investments of $50 million to $150 million

A firm founded by Carlyle Group Inc. alumni gathered more than $1 billion to wager on US government contractors, aerospace and defense companies, underscoring the growing role of private equity firms in shaping the nation’s technology.

Capitol Meridian Partners raised about $900 million for its first fund, exceeding a $650 million target, according to people familiar with the matter. Investors provided an additional $300 million to do deals alongside the Washington-based firm.

It was launched in 2021 by Adam Palmer and Brooke Coburn, former partners behind technology and defense bets at Carlyle. They left the private equity giant after it decided not to raise new funds dedicated to middle-market buyouts.

Capitol Meridian has benefited from a surge of investor interest in US companies that are too small for multinational asset managers.

High borrowing costs have prompted investors to seek out managers that pursue small deals, which can require less debt. Capitol Meridian seeks to deploy its fresh cash on investments ranging from $50 million to $150 million.

“We are not focused on elephant hunting,” Coburn said in an interview.

At Carlyle, Coburn’s various roles included head of the middle-market buyout team. He was also deputy chief investment officer for real assets, reporting to Glenn Youngkin, who was co-chief executive officer before leaving to become Virginia’s governor.

Global Tensions
Capitol Meridian, with four former senior Carlyle executives, is part of a growing cohort of smaller buyout firms that provide funding for technology used by the government. US private equity firms spent roughly $8.5 billion to acquire US defense companies from 2021 through 2023, almost triple the amount deployed over the preceding seven years, according to data from Dealogic.

War in the Middle East, Russia’s invasion of Ukraine and rising tensions between the US and China have stoked investor interest in the defense sector. Some family offices and pensions, previously hesitant to provide funding for defense contractors, are now plowing money into them.

“With the rise and re-emergence of the nation-state adversary, there’s a need for the acceleration of technology development,” Palmer said in the interview. And the federal government is behind in adopting technology, creating a role for private capital to bolster it, he added.

Palmer ran Carlyle’s global aerospace, defense and government-services investment team, leading deals such as its 2019 investment in Titan Acquisition Holdings, an industrial shipping repair company. He also led the US middle-market buyout team.

Capitol Meridian’s investments include LMI, which provides customized technology for the government. One of its tools screens AI models for interference by adversaries. Its advisory council includes former top brass of military and intelligence agencies, including Mark Esper, who served as defense secretary during the Trump administration.

The private equity firm also has backed a company that provides data analytics for government agencies and a business that builds speed-detection cameras and software for law enforcement services.

Capitol Meridian turned away foreign sovereign wealth funds.

The firm undertook a “thoughtful curation” of its investor base, Coburn said.

It focused on US investors and those in the alliance known as the “Five Eyes” — including Australia, Canada, New Zealand and the UK.