The big deal about the Carlyle-Booz “Big Deal”

What often makes it challenging for investors and stakeholders to identify a market bottom is that the signs of rebirth can be invisible to the naked eye. And then you have deals like the one announced last week that whacks you like an ice cream migraine. Carlyle Group’s purchase of a majority stake in Booz Allen Hamilton’s U.S. government consulting business for $2.54 billion was a big deal – not only in size but for what it might signal about the credit market’s attempt to pull itself out of the abyss.

In a Wall Street Journal article (subscription required), Carlyle co-founder David Rubenstein offered that, “We think that the bottom has been hit in terms of private-equity investing activity and you’re now beginning to see the upward swing.” If that is in fact the case then the M&A specialists may be in for a busier summer than anticipated as, on paper, it will go down as the biggest buyout deal since last July.

photo-ralph_shrader.jpgMcLean, Va.-based Booz Allen, will separate the corporate consulting unit into a distinct company, while CEO Ralph Shrader will run the government-focused unit now owned by Carlyle in a transaction expected to close later this year assuming it receives shareholder and regulatory approval. Booz Allen’s government consulting unit (one of the largest private government contractors) currently employees 18,000 worldwide and has experienced significant growth post 9/11 relative to the commercial unit – which some suggest led to the deal.

Booz clocked in with $2.4 billion in prime contracting revenue last year, and Shrader – CEO since 1998 – has orchestrated steady double-digit growth for much of that time. In pre-buyout comments to Washington Technology regarding the rumored deal Shrader stated firmly that it would only happen if the best interests of the firm were served.

Brian Lustig is co-founder of Lustig Communications, a Rockville, MD-based communications firm that works with growing technology and government IT firms. Lustig is also a contributor to local business and industry publications.

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