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.