Friday, May 16, 2008

Carlyle to Down Booz in $2.54 Billion Shot

Reuters reported The Carlyle Group is buying a majority stake in the government business of Booz, Allen & Hamilton. Carlyle, the politically connected private equity underwriter (PEU), will pick up controlling ownership of the BAH's huge consulting and intelligence division. It looks like a win/win from here as our federal government continues spending dollars out the wazoo on spying. In addition, Carlyle already has many of its over 1,000 affiliates doing work for the feds.

The new Booz Government Division can have its consultants recommend products or services from fellow Carlyle corporations. BAH's press release mentioned telecommunications, healthcare and defense. It just happens The Carlyle Group organized its portfolio companies in similar fashion.

Their newest affiliate can use its intelligence to gain competitive advantage, as even more work is jettisoned to the private sector in bi-partisan like fashion. Carlyle co-founder William Conway hates a level playing field. The Booz acquisition should tilt government contracts even further in Carlyle's favor. (At least they're starting out with a $12.2 billion indefinite quantity, indefinite delivery contract from Uncle Sam under the military's ENCORE II program.)

Other recent news had Norman Pearlstine joining Bloomberg as Chief Content Officer. With the move, how will Carlyle ensure their good name? Does buying a major contractor in the feds spying arm help? There's much dirt to bury, or should I say mud.

Carlyle just got fired by Boeing from a joint venture for holding up production of the 787 Dreamliner. They also failed 24 patients in their LifeCare hospital in New Orleans post Hurricane Katrina. During Norman's term as media man, neither story got much, if any play in the news. With Booz on board, can Carlyle stuff its next management debacle? Highly likely.