IMB leverages IRS upgrade with eTel investment

'The IRS is an essential government agency that has been underinvested in,' said IMB founder Tarrus Richardson.

The federal government’s push to modernize the Internal Revenue Service over the next decade inspired IMB Partners to invest in eTelligent Group, Tarrus Richardson, the founder and chief executive of the Bethesda, Maryland-based private equity firm, told PE Hub in an interview about the deal, which was announced earlier in July.

Founded in 2005 and based in Woodcliff Lake, New Jersey with an office in Ashburn, Virginia, eTel develops digital transformation services, including cybersecurity and web services, for the IRS and the US Treasury department.

IMB’s investment in the software developer comes at a time when the government is channeling billions of dollars into bolstering the IRS.

Time to upgrade

“The IRS is currently going through a growth phase, given the recent increase in funds it has been appropriated, which is approximately $70 billion over the next 10 years, to improve taxpayer services and to upgrade its IT systems. Given this dynamic, we think it’s a unique moment in time to partner with eTel to support its growth initiatives,” he added.

In addition to the IRS, eTel is actively pursuing additional opportunities with the US Treasury and other government agencies, Richardson said.

The investment comes in the face of a tight economic outlook that has seen other entities scaling back their expansion plans. For the IRS, Richardson believes the organization, as a revenue engine for the US government, will press ahead with its plans to build capabilities.

Tarrus Richardson, IMB Partners

“While the overall economic outlook in the US is somewhat cloudy, the IRS is an essential government agency that has been underinvested in and is now looking to work with its core partners to support its growth as they look to improve taxpayer services,” he said.

IMB is looking at both organic and inorganic strategies to help scale eTel.

Also, part of the strategy is to strengthen eTel senior leadership by hiring executives, such as the COO and CFO and others focusing on business development. “We are excited to back eTel and its founders and support the company’s efforts to substantially increase the size of its workforce, professionalize its business, and grow with existing customers,” Richardson said.

On the M&A front, Richardson said eTel will selectively look to acquire additional government IT service contractors performing similar or complementary work at other agencies over the next 12 to 24 months.

In its portfolio, IMB has Ashburn Consulting, a Leesburg, Virginia-headquartered company specializing in cybersecurity and network engineering services to education, federal, state and local government agencies and corporations. IMB invested in Ashburn in 2020.

The firm also has e&e IT Consulting, a Mechanicsburg, Pennsylvania-based company that provides IT staff augmentation and project-based consulting services to state agencies, corporations and the federal government. IMB made its initial investment in e&e back in 2014.

With experience backing founder-led businesses, Richardson is hoping for a booming business at eTel. “If we are successful at backing our new partners to help them build a bigger, better, more efficient business, we will be able to drive returns to our investors over the coming years,” he said.