Thursday, November 4, 2010

Carlyle's $333,000 million Management Fee for Booz Allen Hamilton

Booz Allen Hamilton's S-1/A states on page 67:

Increase to management fees paid to Carlyle of $333,000 million (see Note 19 to our consolidated financial statements for additional information regarding the management fees)
Carlyle is known for bleeding affiliates via transaction fees and management fees.

Booz Allen Holding pays TC Group an aggregate annual (management) fee of $1.0 million for such services, plus expenses. In addition, Booz Allen Holding made a one-time payment to TC Group of $20.0 million for investment banking, financial advisory and other services provided to Booz Allen Holding in connection with the acquisition.
 Another method is special dividends.  The S-1 indicated:

Special dividends in the aggregate amount of $114.9 million and $497.5 million as of July 29, 2009 and December 8, 2009.
That's over $610 million.  Dividends alone sent Carlyle into the black.   Bloomberg reported Carlyle paid $5.28 per share.  The $497.5 million dividend equaled $4.642 per share, while $114.9 million represented a dividend of $1.087 per share.  That's $5.73 per share, or  45 cents profit per share, prior to any IPO.

This is courtesy of Uncle Sam, the source of 98% of Booz's revenue.  Carlyle loves the federal wallet.  Through Booz's vast swath of government advisory services, Carlyle has a ringside seat to future federal check writing.  They aren't ready to kill the goose laying the golden egg.

I found another oddity on page II-3.

On May 15, 2008, we sold 10,000 shares of common stock to Carlyle Partners V US, L.P. for aggregate consideration of $10.00

The IPO will pluck but a few feathers.

At the middle of the offer range, Booz Allen would be valued at about 37 times earnings 

Investors should read the prospectus to see how much Carlyle profited pre-IPO.

Disclosure:  A note on page 53 did not have the million after the $330,000 increase in Carlyle's $1 million management fee.