[Infowarrior] - Booz Allen Is in Talks to Sell Government Unit to Carlyle

[Richard Forno]

The Wall Street Journal, January 16, 2008
Booz Allen Is in Talks to Sell Government Unit to Carlyle

Defense Consultant Expected to Draw Price of $2 Billion

By MATTHEW KARNITSCHNIG and AUGUST COLE

January 16, 2008; Page C5

http://cryptome.org/spy-bah.htm

Booz Allen Hamilton Inc. is in discussions to sell its government-consulting
business to private-equity firm Carlyle Group, according to people familiar
with the situation.

The deal would be centered on Booz Allen's influence in defense and
intelligence contracting. If an agreement is reached, the sale price will
likely be around $2 billion, the people say.

Booz Allen has held talks with other private-equity firms as part of a
debate about the McLean, Va., company's future. For Carlyle, a deal would
complement the Washington firm's extensive holdings in aerospace and
defense.

Any deal would be significant for the Pentagon, the intelligence community
and lawmakers, as well as the biggest firms in the defense sector. Booz
Allen, once primarily a management consultant to corporations, now plays a
major role in some of the costliest and most complex defense projects. The
company has extensive government contracts -- totaling more than $2 billion
a year -- with the Pentagon, intelligence services and various civilian
agencies, including the Department of Homeland Security.

Booz Allen's executives have debated how to take advantage of the booming
growth in its defense-consulting business. The government business now
accounts for more than 50% of the company's $4 billion in revenue. The
firm's past three chief executive officers have come from the government
side of the firm. Booz Allen has more than 300 senior executives and 20,000
employees world-wide.

A Booz spokeswoman yesterday declined to comment about possible buyers for
the government-services group.

The size and influence of Booz Allen's government-consulting practice has
been on the rise since the Sept. 11, 2001, terrorist attacks, as the
government has sought more outside help for projects such as setting up the
Department of Homeland Security's management to engineering and integration
work for advanced Air Force satellites.

Booz Allen employs numerous retired military officers and former
intelligence-agency chiefs. Retired Navy Admiral J. Michael McConnell,
former head of the National Security Agency, was a Booz Allen executive
until President Bush named him director of national intelligence in 2007.
James Woolsey, former head of the Central Intelligence Agency, is another
high-profile executive.

The move comes at a time when the defense industry has been under fire for
having too much control of government contracts. Lockheed Martin Corp.,
Northrop Grumman Corp. and Boeing Co. have taken the lead overseeing
development of big military programs. That has alarmed critics in Congress
and watchdogs worried about government ceding too much authority.
Legislation in the 2008 Defense Authorization Act will end the practice of
awarding contractors such overarching roles within a few years. The industry
contends that the government lacks the expertise to handle complex projects.

--Joann S. Lublin contributed to this article.

Write to Matthew Karnitschnig at matthew.karnitschnig[at]wsj.com and August
Cole at august.cole[at]dowjones.com