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Carlyle buys Booz Allen government consulting for $2.5bn

The Washington DC-based firm has added to its public sector portfolio with a majority stake in a unit of the consulting giant.

The Carlyle Group has purchased a $2.5 billion (€1.6 billion) majority stake in consulting giant Booz Allen Hamilton’s government consulting unit, adding yet another portfolio company with deep ties to the federal government.

As a condition of the deal Booz Allen will divest its commercial consulting division as a stand-alone company owned and operated by its executive staff.

The acquisition is expected to close in mid to late 2008, subject to shareholder and regulatory approval.

“The partners of Booz Allen have built a world-class business and brand focussed on providing critical services to government,” Carlyle managing director Peter Clare said in a statement. “We are excited about partnering with the firm and supporting the continued growth of the business.”

Carlyle could not be reached for comment.

Virginia-based Booz Allen has landed some of the most premier public consulting contracts, especially among US military agencies. High-profile clients have included the Department of Defense, Air Force, Army, Navy and Marines, as well as the Internal Revenue Service and National Aeronautics and Space Administration, according to the company’s most recent annual report.

Booz Allen provides a host of advisory services to its public clients, including engineering, information technology, systems development and integration strategies. The governmental unit, which employs more than 18,000 and generates net annual revenues in excess of $2.7 billion, will retain chairman and chief executive Ralph Shrader to head its management team.

Carlyle’s interest in Booz Allen comes as little to surprise to those familiar with the firm’s history and personnel. Some of Carlyle’s most lucrative investments have been those associated with the public sector and defense industries, including the 2004 exit of arms maker United Defense Industries and the 2005 sale of infrared camera developer Indigo Systems.

“In terms of our government business, they are a Washington company, and our center of gravity is in the Washington area,” a Booz Allen spokeswoman told PEO. “There was just a very high comfort level with Carlyle.”

Carlyle at one point employed the services of President George H W Bush and former Securities and Exchange Commissioner Arthur Levitt as high-level advisers. The firm’s aerospace and defense investment unit include former Air Force chief of staff John Jumper and Congressional staffer Francis Finelli.

European Carlyle associate Javier Aguila previously worked for Booz Allen but was not mentioned among those involved in the deal.