Abry Partners Backs KaufmanIT in Bet on Government IT Services

Abry Partners has acquired a majority stake in KaufmanIT, a Miami-based IT services contractor that's built its business helping federal agencies migrate legacy systems to the cloud. The deal — financial terms weren't disclosed — hands control of the 15-year-old firm to a private equity shop known for rolling up fragmented service providers in government and healthcare.

KaufmanIT founder and CEO Mike Kaufman will stay on to lead the company. So will the entire management team. That's the standard script for these deals, but it matters here — Kaufman's built relationships across defense and civilian agencies that don't transfer easily.

The company works with the Department of Defense, Department of Homeland Security, and various civilian agencies on cloud infrastructure, cybersecurity, and application modernization. It's the kind of unglamorous, high-margin work that's eating a growing share of the federal IT budget as agencies face mandates to retire systems built when floppy disks were cutting-edge. Federal cloud spending hit $27.5 billion in fiscal 2025, up 18% year-over-year, according to the Government Accountability Office.

Abry Partners, a Boston-based firm managing $5 billion across media, communications, and business services, has been hunting in the government contractor space for years. It backed managed service provider Highlight Technologies in 2023 and sold immixGroup to Accenture in 2021. The pattern: buy strong operators, let them keep running the business, bolt on acquisitions, sell to a strategic buyer or larger PE firm once revenue crosses $500 million.

KaufmanIT isn't building fighter jets or writing AI models for the Pentagon. It's the firm agencies call when they need someone to move a sprawling Oracle database to AWS GovCloud without breaking everything, or when a legacy Java application needs to talk to a microservices architecture deployed in containers.

That's less sexy than frontier tech. It's also extremely profitable and nearly recession-proof.

The company holds multiple contract vehicles with federal agencies — including GSA Schedule contracts and spots on General Services Administration indefinite delivery/indefinite quantity (IDIQ) frameworks that let agencies tap pre-approved vendors without running full competitive bids every time. Those vehicles are the golden tickets of the federal IT world. Once you're on the list, your sales cycle compresses and margins expand.

KaufmanIT's technical stack focuses on three areas: cloud migration and management (primarily AWS and Azure in government cloud environments), application modernization (re-platforming legacy apps or rebuilding them as cloud-native services), and cybersecurity operations (monitoring, incident response, compliance with NIST and FedRAMP standards). None of that requires inventing new technology. It requires knowing how to navigate federal procurement, hold a security clearance, and not screw up when the stakes are high.

Federal IT spending has climbed every year for the past decade, regardless of which party controls Congress or the White House. The FY2026 budget request allocates $131.2 billion to civilian and defense IT — a 6.4% increase over the prior year. Cloud infrastructure and cybersecurity account for the fastest-growing line items.

Why? Two forces. First, legacy system maintenance costs are compounding faster than agencies can retire old platforms. The IRS still runs COBOL applications written in the 1960s. The Pentagon's logistics systems include software that predates the internet. Modernizing isn't optional anymore — it's the only way to avoid catastrophic failures.

Second, compliance mandates keep tightening. Executive orders on zero-trust architecture, CMMC 2.0 requirements for defense contractors, and post-SolarWinds paranoia about supply chain security have all pushed agencies to invest in monitoring, segmentation, and access controls. That's created a permanent demand base for firms like KaufmanIT that can implement and operate secure cloud environments.

Source: GAO Federal IT Dashboard, OMB Budget Reports

Not all federal IT dollars are created equal. Defense spending tilts toward classified systems, satellite communications, and weapons platform software — areas where incumbents like Booz Allen, Leidos, and SAIC dominate. Civilian agencies, by contrast, spend heavily on enterprise IT: email migration, case management systems, citizen-facing portals, data lakes. That's where mid-market contractors like KaufmanIT can compete without needing top-secret clearances for half the staff.

Abry didn't buy KaufmanIT to run it as a standalone business forever. The firm's track record in government services follows a clear pattern: acquire a founder-led operator with strong contract positions, use that as a platform to bolt on smaller acquisitions, grow revenue to a scale that attracts strategic buyers, then exit.

When Abry sold immixGroup to Accenture Federal Services in 2021, the company had completed seven add-on acquisitions in three years. Revenue had grown from roughly $200 million at entry to over $600 million at exit. Accenture paid a reported 1.8x revenue — a rich multiple justified by the contract base and customer relationships that came with it.

KaufmanIT is almost certainly being set up for the same trajectory. Abry will look for smaller firms with complementary capabilities — maybe a cybersecurity shop with DoD clients, or a cloud migration specialist with a strong VA relationship — and fold them into KaufmanIT's operational structure. Each acquisition adds contract vehicles, clearances, and customer touchpoints. By year three, the combined entity is a $400-500 million revenue platform that Deloitte, KPMG, or a larger PE-backed roll-up would pay a premium to acquire.

The model works because federal agencies value incumbency and past performance above almost everything else. A firm that's successfully delivered cloud migrations for DHS has a significant edge bidding on the next DHS cloud contract — even if a dozen competitors could technically do the work. Abry's bet is that assembling a portfolio of those incumbent positions creates something more valuable than the sum of the parts.

One risk: integration. Rolling up services firms is notoriously hard. Cultures clash, key employees leave, contract renewals stall when the customer's main point of contact gets reassigned. Abry's had wins and losses. immixGroup worked. Not every deal does.

Mike Kaufman founded the company in 2011. Fifteen years is a long time to run a federal contractor without outside capital — most founders either sell earlier or take on debt to fund growth. Kaufman bootstrapped, which gave him control but also capped how fast he could scale.

Private equity offers a different path. Kaufman keeps running the business (and likely retains a meaningful equity stake that pays off at exit). Abry brings capital to bid on larger contracts, fund acquisitions, and hire ahead of revenue. If the exit goes well, Kaufman walks away with a much larger outcome than he'd have gotten selling the business outright today.

KaufmanIT is part of a broader wave of PE activity in government IT services. At least a dozen similar deals closed in the past 18 months, spanning cybersecurity, cloud infrastructure, and digital transformation.

In March 2026, Carlyle Group acquired DigiFlight, a defense IT contractor focused on DevSecOps and zero-trust architectures. In January, Vista Equity Partners took a stake in Steampunk, which helps agencies adopt agile development and continuous integration pipelines. Last November, Enlightenment Capital backed TA-Defense, a small-business contractor with Air Force and Space Force contracts.

The common thread: these firms occupy a sweet spot where federal demand is structural, competitive moats are real (clearances, contract vehicles, past performance), and margins hold up even when budgets tighten. Private equity loves that profile — especially when interest rates are high and growth-stage tech valuations are still resetting.

KaufmanIT isn't building hardware or managing billion-dollar weapons programs. Those contracts go to Lockheed, Northrop, Raytheon — the primes. What's changed in the past decade is that even the primes now subcontract most of their software and IT integration work to specialists. The Pentagon doesn't want Lockheed writing cloud migration scripts. It wants Lockheed managing the program and firms like KaufmanIT doing the technical execution.

That shift has opened the door for mid-market IT contractors to capture work that used to stay in-house at the primes. It's also made these businesses more attractive to private equity, which historically avoided defense contracting due to long sales cycles, political risk, and low margins. IT services contracts are shorter, higher-margin, and easier to scale.

In the near term, not much changes. Kaufman stays CEO. The team stays intact. Existing contracts continue. Abry isn't buying this to flip it in six months — the hold period for these deals is typically three to five years.

What does change: the pace of growth. Expect KaufmanIT to start bidding on larger contracts it couldn't pursue as a smaller independent. Expect acquisitions — probably two or three in the next 18 months, targeting firms with $10-50 million in revenue that bring new contract vehicles or technical capabilities. Expect headcount to grow, particularly in business development and proposal writing (the unglamorous work of winning federal contracts).

The biggest question is whether Abry can execute the roll-up without breaking what made KaufmanIT attractive in the first place. Federal customers are buying relationships as much as capabilities. If the key account managers leave, or if integration bogs down delivery quality, renewals suffer. That's where these deals often stumble.

To understand where KaufmanIT fits in the market, it helps to look at similar transactions. The table below shows recent private equity investments in mid-market government IT contractors — all focused on cloud, cybersecurity, or digital transformation.

These deals share a common thesis: federal agencies are locked into multi-year modernization cycles, the work is sticky once you're in, and the competitive landscape fragments into hundreds of small operators that can be consolidated.

Source: Press releases, PitchBook, industry reports

Notice the pattern: most targets are in the $50-200 million revenue range. Too small for the mega-cap PE firms (KKR, Blackstone) to lead directly, but large enough to support a professionalizing management team and fund bolt-on M&A. These are classic platform deals — buy the core, build around it, sell to someone bigger.

Private equity roll-ups in services are littered with failures. The pitch is always the same: fragmented market, stable cash flows, easy synergies. The reality is often: culture clashes, customer defections, integration costs that eat all the margin, and exits that underwhelm because revenue growth stalled.

Government IT services add specific risks. Security clearances don't transfer between companies — if a key engineer leaves, you can't just replace them overnight. Contract vehicles are tied to specific corporate entities, so acquisitions require careful structuring to preserve bidding rights. And federal customers are notoriously slow to approve novations (the legal process of transferring a contract from one company to another after M&A). A deal that looks clean on paper can take 18 months to actually integrate on the contract side.

There's also the valuation risk. If Abry paid a premium multiple — say, 12-15x EBITDA — based on projected growth from acquisitions that don't materialize, the exit math gets ugly. The firm needs to grow revenue by at least 3x to justify that entry price at a comparable exit multiple. That's aggressive, even in a growing market.

Finally, there's timing. Federal IT budgets are growing now, but that's not guaranteed forever. If a future administration decides to freeze civilian IT spending (it's happened before), or if a major defense budget cut forces agencies to delay modernization projects, the whole thesis wobbles. Abry's bet is that the secular shift to cloud and zero-trust is irreversible regardless of budget cycles. Maybe. But federal procurement has a way of defying logic.

Step back, and the KaufmanIT deal is a data point in a larger trend: private equity treating government IT the way it treated telecom infrastructure in the 2000s or healthcare services in the 2010s. It's fragmented, capital-intensive, regulation-heavy, and growing steadily regardless of economic cycles. That's the PE sweet spot.

The federal government is the largest IT buyer in the world. It's also one of the slowest to modernize. That gap — between what agencies need and what they currently operate — represents hundreds of billions in spending over the next decade. Someone's going to capture that. Abry's betting that a scaled-up KaufmanIT is positioned to take a meaningful share.

Whether that bet pays off depends on execution. Can Kaufman and his team maintain delivery quality while doubling headcount? Can Abry find the right acquisition targets and integrate them cleanly? Can the combined entity win enough new contracts to justify the growth projections baked into the deal model?

We'll know in three years. If KaufmanIT exits to Accenture, Deloitte, or a larger PE firm at a 2x+ revenue multiple, Abry looks smart and Kaufman walks away wealthy. If integration stumbles, key contracts don't renew, or the federal budget environment shifts, this becomes a cautionary tale about rolling up services businesses that depend on relationships you can't replicate in a spreadsheet.