Beyond the hype of Booz Allen's IPO
When any company files to go public the instinctive question is how much money are they going to raise and what will they spend it on.
When Booz Allen Hamilton filed a updated registration form for its IPO on Thursday, the news in the financial press focused on the estimated 241 percent return Booz Allen’s owners, the Carlyle Group, will make on their two-year-old investment. Booz Allen stock is expected to start trading on Wall Street on Nov. 16.
But of equal interest to me are the insights the filing with the Securities and Exchange Commission
reveals about Booz Allen’s world view and the current state of the federal contracting market.
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In the “Risk Factor” section of the filing, Booz Allen describes all the ways the company might fail and the challenges it faces in running its business. These include standard items such as government customers not getting enough funding to continue or start projects and the impact failed systems might have on revenue.
It also describes risks associated with working with subcontractors and the intense competition it faces from its peers.
Booz Allen warns that because so many of its contracts are classified, investors will have limited insights into portions of the business.
The filing also includes a laundry list of risks faced by the industry as a whole. These include changes to procurement regulations, delays and cancellations of programs, limits on multiple-award contracts, and the negative impact of the government operating under a continuing resolution.
The company devotes several paragraphs to increased concerns about organizational conflicts of interest. New regulations may be implemented to further separate sellers of products and services from providers of advisory services. If this happens, Booz Allen may be limited in competing for new business, the company writes.
Other risks include protecting Booz Allen’s reputation, the ability to hire and retain workers, and collecting accounts receivable.
None of the risks Booz Allen articulates is surprising, but it is impressive to see 20 pages dedicated to risks the company faces. They are risks that are very familiar to companies in the market, but it is worth the read.
Posted by Nick Wakeman on Nov 05, 2010 at 7:25 PM