- Investment banker for aerospace, defense, gov’t services
- Established M&A advisory arm of strategy consultancy
- Firm also makes growth equity investments in security
Chertoff Group was founded in 2009 by Michael Chertoff, the second secretary of the Department of Homeland Security, to consult with companies on threat management and government contracting.
Jason Kaufman, head of the firm’s M&A advisory practice, says that making “private equity investments in the security space” was also part of the plan.
It was a matter of first building a platform, “supporting companies to grow organically, to manage risk, and ultimately exit through M&A,” Kaufman explained. “Oftentimes, those companies require capital to do those things, and we can supply the capital as well.”
For its first deals, the firm chose companies it knew as subcontractors from its consulting business. In 2015, Chertoff Group acquired a majority stake in Delta Risk, a San Antonio cybersecurity company. The firm then teamed with Carlyle Group to buy a controlling stake in Coalfire Systems, a larger cyberrisk advisory.
“We’ve had a long relationship with Carlyle,” Kaufman said. “We had always talked about looking for opportunities to partner together.” Coalfire was “the ideal match,” too big for Chertoff Group alone but a good size for Carlyle’s growth fund.
Most recently, Chertoff Group contributed equity to a $6.6 million Series C round in ZP Group, a cybersecurity incident response and staff augmentation business. Chertoff Capital was exclusive financial adviser.
The firm’s next investment is likely to be in homeland-security technology, Kaufman said — “things like homeland-data analytics, biometrics, aviation security.” Raising money from a network of family offices in addition to its own capital, Chertoff Group hopes to do a couple of principal investment deals a year.
Kaufman joined the firm in 2011, having worked at two boutiques that were acquired by larger banks (Jefferies Group and BBT Capital Markets).
“I’ve always had an interest in government, so I went to Georgetown School of Foreign Service, thinking I would go probably work for the State Department overseas,” he recalled. But when he graduated in 1998, “it was the time of the Clinton peace dividend. They didn’t offer the foreign-service exam, so I had to pivot and find a different career track.”
Applying his “passion for national security policy” to the private sector, Kaufman went into investment banking for the aerospace, defense and government services sector.
Chertoff Group presented a chance to work with former officials “at the very highest levels of government,” like former NSA and CIA Director Michael Hayden, “taking their inside policy expertise and combining it with the kind of financial background I had,” Kaufman said. The investment banking subsidiary he set up, Chertoff Capital, “is the bridge to go from strategy and policy consulting over to investing.”
Jason Kaufman, president and M&A practice lead, Chertoff Group. Photo courtesy of the firm.