Carlyle In Talks to Buy Unit of Booz Allen

The Carlyle Group is in talks with Booz Allen Hamilton to purchase the technology and consulting firm's government business, according to a source familiar with the negotiations.

Booz Allen spokesman Marie Lerch last night declined to comment on whether Carlyle, based in the District, was in talks with the McLean firm. The report appreared on the Web site of the Financial Times yesterday. A potential sale has been the subject of media speculation for weeks.

Carlyle spokesman Christopher Ullman declined to comment. The stage of the talks could not be determined.

Booz Allen, which is privately held, is among the top government contractors in the country and one of the largest employers in Northern Virginia, with more than 11,000 employees in the region. It has 20,000 employees worldwide, most of whom work on its government business. Its clients include the Navy, Air Force and U.S. Agency for International Development.

On the commercial side, which is believed to be the more lucrative part of the business, Booz Allen is a well-known source of market research. About 20 percent of its employees focus on the commercial sector.

The consulting firm, which went public in 1970 and then was taken private six years later, is owned by 300 top executives and has about $4 billion in revenue. About half of that comes from the government.

A marriage between Carlyle and Booz Allen could make sense for the private-equity giant for many reasons. Carlyle has a long and lucrative history of owning and doing business with government defense contractors, such as aerospace and ground-based military programs.

Carlyle owns Vought Aircraft Industries, an aerospace company. Its buyout arm made a substantial profit with the purchase and subsequent sale of United Defense, another military contractor.

Carlyle has about $75 billion under management and is looking for places to put that money to work. It recently launched an infrastructure fund that will invest in and operate toll roads, water purification systems and other such structures.

Booz Allen hinted last month that it might change its strategic direction. Its chairman, Ralph W. Shrader, sent an electronic memo to employees in December informing them that the company was considering separating its commercial and government businesses.

Shrader said in the memo that the strategy of splitting the company into two parts was in the "development stage." He also said both Booz Allen units were successful but were facing vastly different business models and regulatory issues.

Booz Allen Hamilton was the main sponsor of the PGA Tour stop in the Washington region from 2004 to 2006.