Booz Allen Hamilton planning for an IPO

By Thomas Heath
Washington Post Staff Writer
Tuesday, June 22, 2010

Booz Allen Hamilton, a McLean-based government consulting firm and one of the Washington region's largest private-sector employers, filed papers Monday with regulators announcing its intent to make an initial public offering of stock.

The company, majority-owned by the Carlyle Group, plans to sell up to $300 million worth of shares to the public, according to a filing with the Securities and Exchange Commission. A share price has not been set.

Carlyle does not plan to sell any of its stake as part of the offering. It will use the proceeds to reinvest in Booz Allen and pay down debt, according to the SEC filing.

The stock sale is part of a recent trend by Carlyle and other private-equity firms to take the companies in their portfolios public, further evidence that the economy is strengthening and that credit markets may be healing from the financial crisis.

"The fact that they are able to go public is an indication that capital markets are receptive to new public companies," said William Walton, former chairman of District-based Allied Capital, which bought and sold companies before it merged with a New York firm this year. "It's healthy."

Booz Allen, which employs about 15,000 people in the Washington region, provides consulting services in strategy, operations and information technology to major firms, government agencies and institutions, according to Carlyle's Web site.

Its major clients include the Defense Department, including all branches of the military, as well as the departments of Energy, Health and Human Services, Homeland Security, and the Treasury; U.S. intelligence agencies; and the Environmental Protection Agency.

"It's good for the area to have a prominent, public international firm headquartered here," Walton said. "It adds prestige to the area, and it's a sign that Washington is a place that's good for business. They will want to stay close to their customers."

The consulting firm, founded by Edwin G. Booz in 1914, went public in 1970 and taken private six years later. It had been owned by 300 top executives and had about $4 billion in revenue before the Carlyle purchase. About half of that came from the government.

In August 2008, Booz Allen Hamilton completed the separation of its government and commercial businesses, selling a majority stake in the government unit to Carlyle for $2.54 billion.

The split had its roots in the vast differences that developed between the firm's two units earlier this decade. The goal of the spinoff was to create a company focused solely on its government contracting business, refining the culture and aligning the interests of its management.

The commercial unit, now known as Booz & Co., grew, but not at the same pace. The majority of the firm's revenue during the past 10 years had come from its government business.

Carlyle, which usually buys companies, shakes them up and then tries to sell them for a higher price, had said at the time of purchase that it would leave Booz Allen largely alone.

Carlyle is now one of the largest asset-management firms in the world, managing $90.5 billion in 67 funds in 19 countries in 260 companies in three asset classes (private equity, real estate and credit alternatives), according to its 60-page annual report.

A marriage between Carlyle and Booz Allen made sense for the private-equity giant, which has a long and lucrative history of owning and doing business with government defense contractors working on aerospace and ground-based military programs.

Booz Allen had enjoyed rapid growth because of increased government spending after the Sept. 11, 2001, terrorist attacks. The firm has pioneered some of the top ideas in consulting, including supply-chain management, now broadly used by others to manage the flow of goods and people.

Booz Allen sponsors high-profile events and spent $1 million to support the Edward Hopper exhibit at the National Gallery of Art in 2007 and early 2008.

As a measure of the company's size, when Booz Allen rented the National Air and Space Museum's Steven F. Udvar-Hazy Center near Dulles International Airport for its holiday party in December 2007, employees were not allowed to bring guests because of concern that the building's capacity would be exceeded.

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