Booz Allen Hamilton Expands IT Capabilities With $250M Deal

(The Washington Post) -

President-elect Donald Trump campaigned on a pledge to “drain the swamp” and rid Washington of special interests, but that hasn’t stopped some federal contractors from feeling bullish about their prospects.

McLean, Virginia-based consulting giant Booz Allen Hamilton is the latest to show that optimism after it announced last week plans to acquire Maryland information-technology contractor Aquilent for $250 million by the end of the month, adding a 350-person operation based in Laurel, Maryland.

The move is an attempt to capitalize on changes in the way the government stores and processes information, in which new capabilities such as cloud computing and fast-paced “agile” software development have reinvented the information-technology business.

“This is not your father’s or grandfather’s Booz Allen,” Executive Vice President Greg Wenzel said. “It’s about modular solutions versus the big-bang solutions that we’ve done in the past. We need to do rapid sprints to get capabilities out quickly.”

Analysts regard the purchase by Booz Allen as an aggressive move by a company not known for frequent buyouts. It comes as the region’s longtime contracting mainstay regained more of its independence after private-equity giant Carlyle Group sold the last of its stake, which amounted to 11 percent of outstanding shares in the company.

Carlyle had engineered a $2.54 billion deal in 2008 to take Booz Allen private, splitting the company’s government work and its commercial consulting business, renamed Booz & Co. PricewaterhouseCoopers eventually acquired Booz & Co.

Two years later, Carlyle took Booz Allen Hamilton public again. The process was one of the private-equity firm’s most profitable. According to an individual, who spoke on the condition of anonymity and not authorized to speak publicly, Carlyle made more than four times its original investment.

Booz Allen Hamilton has since expanded back into commercial and international markets while doubling down on federal contracts.

“I think we’re seeing increased stability in the market and Booz is optimistic about our prospect for growth, as are many of our peers,” Calderone said. “We have been active in the market and we anticipate remaining active in the market.”

As Booz Allen positions itself for future work, it also is trying to restore a reputation tarnished in recent years by its employees’ involvement in high-profile leaks of classified national security data. Edward Snowden’s 2011 National Security Agency leaks, which sparked a backlash in the national security community by revealing classified government surveillance programs, happened while Snowden worked for the firm. More recently, a Booz Allen employee based in Maryland was charged with hoarding decades of classified material in his house and car.

Under Carlyle, Booz Allen is returning to lucrative commercial and international sales.

Booz Allen said in a statement that its newest acquisition should add close to $35 million to the company’s quarterly revenue and boost the company’s operating margins in the fourth quarter of next year.

Booz Allen is riding a growing wave of cloud-based IT adoption across the federal government. The firm recently won part of a $25 million contract to help update the General Services Administration’s public websites and a seven-year contract with the U.S. Postal Service for mobile app development. The company has made other acquisitions to support this strategy, including last year’s purchase of a company called SPARC, which specializes in “agile” software development.

The acquisition announced Tuesday “is meaningful because Booz hasn’t made a lot of acquisitions, especially of this size range, in a while,” said Bob Kipps, managing partner of KippsDeSanto, an aerospace-defense investment bank. “They’re feeling optimistic about the marketplace and they’re on the offensive.”

The deal also allows the firm to take over a slew of contracts with agencies such as the Department of Health and Human Services and the General Services Administration and help expand the firm’s footprint in Maryland.

Aquilent’s business took off when the Obama administration sped up certain open initiatives that made government data accessible online, driving average annual revenue growth of 28 percent since 2011. The firm developed a reputation for helping create user-friendly government websites and mobile-phone portals, including USA.gov and the Postal Service’s USPS.com, and the embattled Affordable Care Act portal HealthCare.gov. It also provides Web hosting services for Amazon Web Services, a fast-growing segment of the federal market.

Some areas of the business could suffer if Trump’s administration is less committed to federal open-data initiatives. But Wenzel does not think policy changes will hurt the business, suggesting tumultuous presidential transitions are par for the course for massive firms like 102-year-old Booz Allen.

“If something happens with open data we will pivot and shift accordingly,” he said. “It just feels like the digital tools that we use in our personal lives will also help our public servants and warriors do their missions as well.”