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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 7:23 PM


Reader Comments

Wed, Nov 24, 2010 Frederick

BHA has collected $250-$300m in Federal contracts for the Army and Airforce in the last couple of quarters. Most collected in $10m or smaller increments. I suppose helping your clint divvy up contracts into noncompetitive chunks could go to "risk management" right?

Thu, Nov 18, 2010

What needs to happen now is the SEC and the federal goverment needs to investigate the Carlyle Group for possible stock manipulation and wrongfully misleading investors. Possible violations include hiring several thousand employees utilizing indirect labor to artificially reflect company growth. Estimates range upwards of several thousad "new hires" to reflect growth from 20,000 employees to upwards of 27,000 employees. At the same time, the government needs to investigate claims that BAH went on a "bid government contracts at a loss" campaign in an effort to inflate growth as a result new contract wins, while knowing they could not execute at these significantly reduced rates. If true, there has been intentional manipulation of BAH business practices that have been used to impact the IPO.

Mon, Nov 15, 2010

The most interesting aspect is, "impact failed systems might have on revenue." What about the impact of failed systems on the Agency, Department, and the taxpayer? How many systems are they referring to?

Sat, Nov 13, 2010

concur 100% "industry standard" used to be what BAH avoided at all costs.."we" were better than that..or so we were told. Then they removed sick time and the slide toward industry standard everything began. Now we bid on everything that comes down the pipe, hire more people than we have work for to inflate growth numbers...it is a joke.

Fri, Nov 12, 2010

Having been Booz Allen's employee for more than a decade, I can attest to much of the previous comments. The last two years have seen an unprecedented focus on 'the numbers' at the cost of the quality of the business and employee welfare. The changes are not for the better, which is a shame since this was once a great company to work for.

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