TPG Growth Closes First Defense-Related Deal

Abbas Yazdani
Abbas Yazdani

TPG Growth, along with Torch Hill Investment Partners, last week acquired ARTEL, a communications and IT services company.

Financial terms of the deal weren’t announced. The seller is Abbas Yazdani, ARTEL’s founder, president and CEO, who will retain a significant minority stake, sources say. TPG led the investment but it’s unclear how big their holding is. Torch Hill will have a minority position, persons say. Yazdani is staying as CEO of the company.

The deal closed last Wednesday. RBC Capital Markets is leading a $95 million facility to back TGP/Torch Hill’s buy of ARTEL, according to Standard & Poor’s LCD.

“We are impressed with ARTEL’s nascent cyber security and information assurance capabilities – capabilities which are necessary for the protection of our nation’s critical infrastructure,” said George Lund, Torch Hill’s chairman, in a statement.

Founded in 1986, Reston, Va.-based ARTEL creates secure networks for satellite communications. ARTEL isn’t a defense firm but it provides services to governments and businesses, one person says. In 2008, ARTEL had $215 million in revenue, according to the ARTEL web site.

The company has been exploring various strategies–including acquisitions and an IPO– for the past five years, a different source says. With the investment, ARTEL now has capital for deals, the second source says.

While ARTEL is the first defense-related buy for TPG Growth, it’s not the first time the firm has invested in a company that sells to governments. Last year, TPG Growth invested in PowerPlan Consultants which provides software to municipalities and utilities.

What is TPG Growth? It’s the successor platform of TPG Ventures, which no longer exists, the first person says. In fact, TPG Growth manages the legacy investments of TPG Ventures. With offices in San Francisco and New York, TPG Growth focuses on middle market and growth equity deals. Investments range between $25 million to $125 million. The firm targets technology and telecom, consumer and retail, health care, basic industry and business services.

Washington D.C.-based Torch Hill, by comparison, is very experienced in defense. The lower middle market PE firm has several soldiers on its payroll including General John Abizaid, who commanded U.S. Central Command. Steven Kappes, former CIA deputy director, is also with Torch Hill. The PE firm typically takes control investments but will do minority deals, I’m told. In January, Torch Hill invested in Blue Hackle Group, which provides security services to corporations, non-profits and government agencies around the world.

Torch Hill has also invested in Diamondback Tactical, which provides armor protection systems like helmets and vests.

Neither TPG Growth nor Torch Hill used outside financial advisors. R. Lee Priest and Melissa Gervasio of BB&T Capital Markets | Windsor Group advised ARTEL.

Officials for TPG Growth, Torch Hill and BB&T declined comment.