Private equity firm Capitol Meridian started in 2021 to bet on defense. Suddenly it’s the hottest sector around

BY LUISA BELTRAN FINANCE REPORTER

Adam Palmer remembers the days in March 2021 when he and Brooke Coburn would interview potential investors from his home just outside Washington D.C. They had just done the unthinkable. Palmer and Coburn had left the security and success of Carlyle Group to launch their own private equity firm right in the middle of Covid-19, when employees for most companies were still working from home.

“No one was in the office. The world was shut down,” Palmer said.

Sitting around Palmer’s dining room table, he and Coburn would talk to possible investors, employees and advisors about their plans to build a private equity firm. They didn’t have a name yet, but the firm would invest in companies and products that protect the U.S. and its military personnel, both men and women. Luckily, it was mild outside, so they kept the windows open.

“It was daunting, and scary, but also rejuvenating,” Palmer told Fortune.

It took about a year but the firm that would eventually call itself Capitol Meridian Partners did get an office. In March 2022, the PE firm opened its doors on K Street in downtown Washington D.C. Capitol Meridian now has 14 employees. About 10 of them, including Palmer and Coburn, previously worked at Carlyle Group during some point in their careers.

Capitol Meridian is part of a breed of PE firms that focus on specific sectors, developing deep expertise and networks to understand the unique challenges and opportunities these industries face. Sector specialists often have an edge over generalist firms. Capitol targets defense and government services. The firm invests in companies that provide hardware, software and services for national security, as well as the aerospace market. The timing couldn’t be better. Public aerospace and defense companies have outperformed the broad market over the past three years and into the first quarter, according to data from investment bank Greenwich Capital Group. Aerospace suppliers posted a three-year performance return of 108.7% as of March 31, while defense suppliers were up 32.8%. This compares to the S&P 500 which gained 23.9% for the same period and the Nasdaq which increased 22.4%.

A shift in sentiment, much of that due to geopolitical issues like Russia’s invasion of Ukraine in 2022 and the recent U.S. attack on Iran’s nuclear sites, is benefiting defense companies and their investors. Much bigger PE firms like Veritas Capital, which targets aerospace and defense and national security as one of its sectors, have been very successful. Veritas collected over $13 billion for its ninth fund earlier this year. “More investors are interested in defense today than have been in my memory,” Palmer said.

Capitol Meridian, however, doesn’t invest in products, such as handguns, that could wind up in a high school. “That’s not where we focus,” Palmer said.

Instead, Capitol Meridian bets on businesses that “support the nation and the warfighters, or U.S. servicemen and women,” said Palmer. Though he has never been in the military, his father was a reservist in Vietnam while his grandfather served in World War II.

In 2024, Capitol Meridian shrugged off a difficult fundraising market to raise $900 million for its first pool plus $300 million in co-investments.

Palmer and Coburn are the third largest investors of the pool. Capitol Meridian has so far taken stakes in six portfolio companies along with 20 add-on deals. It has yet to clinch an exit, Palmer said. The firm is still early in its life cycle with its oldest investment turning three, he said.

Defense is typically not a sector that is favorable to new entrants or generalist investors, due to shifting priorities in government spending, said Matt Autrey, a partner at Adams Street Partners, an investor of Capitol Meridian’s first fund. “Adam and the Capitol Meridian team have been able to succeed investing in the defense sector due to the specialized expertise and networks they possess in the space,” Autrey said in an email.

Hired over breakfast

Palmer has a long history, more than 25 years, in defense and aerospace investing. In the mid-1990s, he was a Lehman Brothers financial analyst working on some deals for Carlyle, which was then a Washington D.C. private equity firm known for its political connections. (George W. Bush sat on the board of one of its portfolio companies).

Bill Conway, one of the Carlyle cofounders, recruited Palmer to join the firm over a breakfast meeting. He received a one-paragraph offer letter days later. Palmer was just 22. “It was a different world back then,” he said.

Palmer’s first PE deal at Carlyle was the firm’s $750 million acquisition of United Defense Industries, maker of combat vehicles, naval guns and missile launchers, in 1997. Carlyle took United Defense public in 2001 and fully exited in 2004, making more than $1 billion in profit. United Defense is widely regarded as one of Carlyle’s best and most notable early investments. The deal also crystallized Palmer’s ambitions. He found that investing in businesses that “support the nation and U.S. servicemen and women” was very rewarding.

Other triumphs include Carlyle’s acquisition of naval ship repair firm Titan Acquisition in 2019, which it sold four years later, for a near four-fold return on invested capital. In 2000, Carlyle scooped up Vought Aircraft, and sold it a decade later, earning a five-fold return. Palmer’s dealmaking was so noteworthy that in 2010 he was featured in Fortune’s “40 under 40,” where insiders predicted he might one day lead Carlyle. The next year, Palmer was named co-head of Carlyle’s global aerospace and defense sector team.

PE or alternative asset manager?


Despite Palmer’s accomplishments, things at Carlyle were changing. In the 1990s, Carlyle was a middle-market firm recognized for its defense deals. Carlyle, like many pioneering PE firms, grew with each success. It went public in 2012, raised its largest fund ever ($18.5 billion) in 2018, and began investing in sectors outside of private equity. It also started calling itself an “alternative asset manager.”

Carlyle, in the 2000s, began focusing on more than defense, investing in consumer, healthcare, industrial and technology. Palmer and Coburn, who was named deputy CIO for real assets in 2018, didn’t care for Carlyle’s “elephant hunting” style of investing where it sought fewer, larger deals.

In early 2021, Palmer and Coburn learned Carlyle wouldn’t be raising another middle-market fund and opted to leave. They decided to launch a new, smaller firm—not a Carlyle clone—that would return them to their middle-market roots. Palmer defines the middle market as deals below $1 billion. “The opportunity for the best returns in this sector, defense and national security, is in the middle market,” Palmer said.

While geopolitical tensions remain high, Capitol Meridian is expected to return soon to the fundraising market for its second pool. Roughly 60% of its first fund is invested. (PE firms generally start marketing when a fund is about 70% invested.)
Fundraising is still difficult. Several large PE firms have struggled to raise funds. Carlyle closed its eighth flagship at $14.8 billion in 2023, significantly below its $22 billion target, according to Buyouts. TPG is seeking $13 billion for its latest flagship, below what it sought for its prior fund, the Wall Street Journal reported in May. Blackstone was expected to wrap up its latest flagship in mid-2023 but didn’t close the pool until earlier this year at a little over $21 billion, far below its initial $30 billion target.

Capitol Meridian is anticipated to seek over $1 billion for its next pool, a person familiar with the situation said. Palmer declined to comment.

Palmer still has the dining room table, where Capitol Meridian started several years ago, stowed away in the firm’s office. His goals for Capitol remain simple. “We want to be the best small PE partnership that helps U.S. servicepeople,” he said.

Michael Puopolo Joins Capitol Meridian Partners as Managing Director

Capitol Meridian Partners (CMP), a Washington, DC-based firm that invests in companies at the nexus of government and commercial markets, today announced the hiring of Michael Puopolo, recently a Principal at Blackstone, as a Managing Director. Puopolo brings ten years of experience at global private equity firms and will contribute to CMP’s continued growth.

At Blackstone, Puopolo helped lead technology investments in a range of markets, including government and education, and served on the boards of five companies including Ellucian, Renaissance Learning, and Cvent. Earlier in his career, Puopolo was a member of The Carlyle Group’s Aerospace, Defense & Government Services team and worked on the firm’s investments in Booz Allen Hamilton, Novetta, and Sequa.

“Having worked closely with Michael during our time at Carlyle, we know firsthand the caliber of his leadership and strategic insight,” said Adam Palmer, CMP Founding Partner. “Michael’s transition from Blackstone to CMP is a testament to our growing presence and reputation in the market. We are thrilled to welcome him to the team and look forward to his contributions as we continue to invest in and support exceptional companies.”

“Michael’s transition from Blackstone to CMP is a testament to our growing presence and reputation in the market.”

— Adam Palmer, CMP Founding Partner

“I am privileged to join Capitol Meridian Partners at such an exciting time in its journey,” said Puopolo. “CMP combines the agility and entrepreneurial spirit of a nimble firm with deep industry expertise and the resources of a global organization. I look forward to helping CMP drive meaningful outcomes for our portfolio companies and investors.”

In addition to Puopolo, CMP has expanded its team with two more key appointments: Gillian Dollard as Vice President of Investor Relations, a new position, and Curtis M. Uehlein as an Operating Executive.

Dollard brings more than a decade of experience in investor relations and operational strategy. Most recently, she was a Senior Associate at Durable Capital Partners, where she played a crucial role in scaling and refining the firm’s investor relations infrastructure.

Uehlein brings 40 years of leadership experience in technology services and business, most recently as the Chief Executive Officer of Berlitz Corporation, where he spearheaded global operational enhancements and technology upgrades. As an Operating Executive Uehlein joins a talented, diverse group of six seasoned executives from across government and industry with 150+ years of leadership, management, and sector expertise. CMP Operating Executives provide industry analysis, support due diligence, mentor portfolio company executives, and share management expertise.

“These additions to CMP’s leadership team reflect our commitment to building a world-class firm,” said CMP Founding Partner Brooke Coburn. “Gillian brings deep expertise in investor relations, while Curt’s extensive leadership experience across global organizations will provide critical insights for our portfolio companies. We are excited to welcome both to the CMP team and look forward to their impact as we continue to scale.”

CMP, with $1.2 billion in AuM, has invested in five companies out of its inaugural $900 million fund, Capitol Meridian Fund I, L.P.:
• LMI – a provider of technology-enabled management consulting, logistics and digital & analytics solutions to the U.S. government
• Altumint – a designer, developer, and operator of AI-based automated traffic enforcement programs for government customers to improve traffic and pedestrian safety
• PrimeFlight Aviation – a diversified aviation services platform serving the commercial, general aviation, and cargo end-markets
• Parry Labs – a defense technology company that develops next generation open architecture mission solutions
• Clarity – a national security software, data, and cyber engineering platform providing complex mission system outcomes

About Capitol Meridian Partners
Capitol Meridian Partners was formed in 2021 to invest at the nexus of government and commercial markets, targeting opportunities where the firm can drive value creation through active engagement with management. The firm draws upon the deep network of industry veterans curated over 28+ years of its principals’ experience in the sector to bring thoughtful strategic resources to each investment opportunity. www.capitolmeridian.com

Christopher Ullman
Capitol Meridian Partners
+1 202-641-2234
chris@chrisullman.com
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D.C.’s Capitol Meridian Partners nearly halfway through deploying mammoth fund

By Ana Lucía Murillo – Staff Reporter, Washington Business Journal

D.C. defense- and aerospace-focused investment firm Capitol Meridian Partners is nearly halfway through deploying its oversubscribed $900 million first fund that closed earlier this year.

The firm, founded by alums of The Carlyle Group, has made five investments so far from this fund and expects to make between three and five more, partner Brooke Coburn said in a recent interview. Most recently it led an $80 million investment into Parry Labs, an Alexandria company that helps military and commercial customers keep their planes, tanks, satellites and ships connected and functioning at their maximum technical capacity even in difficult-to-reach environments.

Coburn said the firm expects to continue investing in lower- and middle-market government contractors, which it views as “the most interesting opportunity set,” because they are smaller than the largest prime contractors but more established than upstarts.

“These are very successful companies that have had a lot of success in building up great books of business and valuable customers and really differentiated capabilities — but generally they need help in getting to the next level,” he said.

Coburn said the team is spending significant time trying to understand opportunities in artificial intelligence. Its five portfolio companies primarily serve the federal government and all are trying to figure out how to better leverage AI and data analytics to better serve those clients, he said.

“If you think about who has large data sets in this world, the government is at or near the top of that list,” he said. “So this is really fertile ground for AI, whether you’re talking about the intelligence community or the Department of Defense, or you’re talking about using Health and Human Services data.”

While AI is one of the biggest opportunities for the industry today, the biggest potential challenge is the ballooning federal deficit and the impact it could ultimately have on government spending, in Coburn’s opinion. The deficit reached $1.8 trillion in fiscal year 2024, which ended Sept. 30, up from $1.7 trillion in 2023 and $1.4 trillion in 2022.

“As that squeeze increases, you’re probably seeing the federal civilian side of the agencies being squeezed disproportionately, because national security is viewed as fairly sacrosanct,” he said. “There is no question that we’ll be in an environment where the government is going to have to learn to do more with less in terms of dollar funding.”

Coburn started Capitol Meridian with fellow-Carlyle alum Adam Palmer in 2021. Since then, the firm has grown to a staff of 14, many of whom the pair had worked with at The Carlyle Group. Mike Gozycki, a partner brought on in 2022, was previously managing director focused on government technology investments at Carlyle while Capitol Meridian ESG Adviser Jackie Roberts was previously Carlyle’s chief sustainability officer.

Coburn likened it to being “on the same team, with a slightly different jersey.”

Competition for talent and deals is growing, but Coburn said the years of working together on government technology deals in particular gives the team a shared understanding for identifying good opportunities, in his view.

“As the world has become more competitive, there’s more competition for deals; it’s harder to drive returns, and in order to do that, you really have to be much more operationally focused. You have to bring a lot more than money — that’s sort of the bottom line,” he said.

Carlyle Alumni Amass $1.2 Billion for Defense, Aerospace Bets

By Dawn Lim

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.

Capitol Meridian Partners adds former Novetta CEO

By Ross Wilkers, Senior Staff Reporter

Capitol Meridian Partners, a private investment firm focused on the government and adjacent commercial markets, has hired former Novetta CEO and Accenture executive Tiffanny Gates as an operating partner.

Gates joins CMP after helping lead the integration of Novetta into Accenture’s federal subsidiary, which acquired the former in 2021.

Gates became CEO of Novetta in 2017 and subsequently was senior managing director of Accenture Federal Services’ national security business until her retirement from AFS in the spring, after which she joined the board of managers.

“Strategic deployment of technology into the government market is critical to enabling agencies to meet their specific mission objectives,” Gates said in a release Thursday. “This is a unique opportunity to help emerging companies bring their technology to the defense and national security sectors.”

CMP is one of three members of the investment consortium that acquired LMI, the six-decade old government consulting firm that became a for-profit company through that transaction.

CMP was founded in 2021 by a pair of Carlyle Group veterans in Adam Palmer and Brooke Coburn.

Tiffanny Gates joins Capitol Meridian Partners as newest Operating Partner

Capitol Meridian Partners (CMP), which invests in companies that operate at the nexus of commercial and government markets – including government services, govtech, and aerospace and defense – today announced that Tiffanny Gates has joined the Firm as an Operating Partner. Gates most recently served as Senior Managing Director and National Security portfolio lead at Accenture Federal Services, having joined Accenture via the acquisition of Novetta Solutions, where she served as President and CEO from 2017 to 2021.

“We have worked with Tiffanny for many years, watching as she transformed Novetta Solutions into a leader in the industry. She is an accomplished executive and proven leader with decades of hands-on technology and public sector expertise who will help drive value creation across our growing portfolio,” said Adam Palmer, Co-Founder of CMP.

“Tiffanny is an accomplished executive and proven leader with decades of hands-on technology and public sector expertise who will help drive value creation across our growing portfolio.”

— Adam Palmer

Gates joins a talented, diverse group of seasoned executives from across government and industry with 150+ years of leadership, management, and sector expertise, including:
• Niloofar Razi Howe – technology investor and executive in the cybersecurity and national security sectors
• Peter Malone – government policy, government appropriations, and aviation industry advisor
• Jackie Roberts – former Senior Director at the Environmental Defense Fund and former Chief Sustainability Officer at The Carlyle Group
• Dennis Liberson – organizational and human resource advisor for human capital planning, management and talent development

“I’m honored to join the Capitol Meridian team and support the work of seasoned investors Adam Palmer and Brooke Coburn,” said Tiffanny Gates. “Strategic deployment of technology into the government market is critical to enabling agencies to meet their specific mission objectives. This is a unique opportunity to help emerging companies bring their technology to the defense and national security sectors.”

Prior to AFS/Novetta, Gates served in executive roles at Raytheon, Blackbird Technologies, ManTech, and Emerging Technologies Group. She transitioned to the private sector after serving in the U.S. Navy as a Cryptologic Officer, and has worked with the Naval Security Group and the National Security Agency. She holds a Bachelor of Science from the United States Naval Academy.

CMP’s portfolio includes:
• LMI – a provider of technology-enabled management consulting, logistics and digital & analytics solutions to the U.S. government
• Altumint – a designer, developer, and operator of AI-based automated traffic enforcement programs for government customers to improve traffic and pedestrian safety
• PrimeFlight Aviation – a diversified aviation services platform serving the commercial, general aviation, and cargo end-markets

About Capitol Meridian Partners
Capitol Meridian Partners, founded in 2021, invests at the nexus of commercial and government markets, targeting opportunities in the government services, GovTech, and aerospace and defense industries where the firm can drive value creation through active engagement with management. The firm draws upon the deep network of industry veterans curated over 25+ years of its principals’ experience in the sector to bring thoughtful strategic resources to each investment opportunity. www.capitolmeridian.com

Christopher Ullman
Capitol Meridian Partners
+1 202-641-2234
chris@chrisullman.com
Visit us on social media:
LinkedIn