Booz Allen, Private Equity & Government Contractors

By Zachary A. Goldfarb

Carlyle Group's buyout of the government unit of Booz Allen Hamilton has raised the possibility that more private equity firms will be looking for companies to buy in the federal services space.

In recent years, heavy government spending has lifted the fortunes of many of these companies. That meant interested suitors would have to pay more for them - something many private equity firms were reluctant to do until Carlyle's $2.54 billion deal for Booz.

In a recent edition of his newsletter, Michael Lent, author of Government Services Insider, noted that some private equity firms, Carlyle first among them, have been active in buying government contractors. He's documented some of the largest deals in recent years by some of the largest firms -- and listed whether the investments are current or not.

Selected Investment....................Status
Carlyle Group
BG&G Tech Services..................Exited
Federal Data Corp......................Exited
Lear Siegler Services..................Exited
U.S. Investigative Services...........Exited
United Defense Industries............Exited
Hawaiian Telecom.....................Current
Sippican Inc............................Exited
ARINC.................................. Current
Veritas Capital
DynCorp International................ Current
McNeil Technologies..................Current
Trawick & Associations..............Current
Vangent..................................Current
Athena Innovative Solutions..........Exited
Integrated Defense Technologies....Exited
Welsh, Carson, Anderson & Stowe
US Investigative Services............Exited
Headstrong..............................Current
Cerberus Capital
IAP Worldwide Services.........Current

By Zachary Goldfarb  |  July 14, 2008; 10:46 AM ET  | Category:  Carlyle
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Carlyle has other affiliates selling to the government. Vought Aircraft Industries helps build military aircraft. Two states, Texas and South Carolina, gave Vought over $75 million to add jobs in their state. So far, Vought cut jobs at their Dallas/Fort Worth facility and won't have to pay back a penny.

Two years ago, Carlyle selected healthcare and infrastructure as areas for increased investment. Both are funded by government dollars. And that's the same LifeCare omitted from Bush's Lessons Learned Report on Hurricane Katrina. How does one leave out the hospital with the highest death toll, 24 patients? Carlyle closed on its purchase of LifeCare just weeks before Katrina struck.

Carlyle buys influence through its hiring practices. Then the former insider greases the skids for huge contracts to come their affiliate's way. It's disturbing, even if technically not illegal. Bush library fundraiser, Stephen Payne would make a great Carlyle employee.

Posted by: Alan | July 15, 2008 9:44 AM

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