Booz-Allen’s S-1 and an imaginary ATS IPO

Booz-Allen is going public, and since they are in some sense an ATS writ large (very large), their S-1 (BoozAllen-S1) is instructive as a template for an imaginary ATS IPO  (I know, I know – ATS is an “important part” of Telcordia…).

In July 2008, BAH was acquired for roughly $2.2 billion by Carlyle who shed the commercial and international businesses and retained the government consulting operation.

So what has BAH been able to do in the short period of time under their private equity owners?    Follow the jump for more nuggets from the S-1

  • They’ve grown revenue from each year from $3.6 billion pre-acquisition to $5.1 billion for FY10.
  • They’ve grown their operating income from $153 million pre-acquisition to $200 million for FY10
  • They have grown their staff from 18.8K to 23.3K employees

In fact, over the last two years, they’ve done such an impressive job of growing the business that Carlyle was able to pay themselves two special dividends totaling more than $440 million in 2009….

Carlyle committed $956 million in equity (the rest of the acquisition was financed by debt assumed by BAH), so they managed to return almost half their investment in little over one year and are now looking at an attractive IPO situation.

The S-1 is valuable for all other sorts of info and there are more interesting comparisons with ATS.

  • They’ve grown revenue at 18% CAGR over the last 15 years.  ATS has grown our external funding at 17% CAGR from FY03 to FY10. (Number from ATS Strategic Plan, Oct. 2009.  Actual performance will vary)
  • They’re total backlog is roughly 176% of current year revenue.  ATS’ total backlog for FY10 was roughly 130% of FY10 revenue.
  • 47% of their employees have advanced degrees with 5% having Ph.D.s.  95% of ATS employees have advanced degrees with 50% having Ph.Ds. (This is an educated guess; I haven’t confirmed the actual numbers)
  • BAH has 23,000 employees. We have 396. (I determined this via DQ, which admittedly may be flawed.  I summed {dq # -c} for # = 21,75,76.  This ignores TTII and the UK).

Other interesting BAH numbers.

  • 87% of revenue generated from engagements where BAH is the prime.
  • 57% overall win rate on new contracts
  • 92% win rate on re-competed contracts
  • $9.0 billion total backlog as of 3/31/10
  • 360 degree employee reviews
  • 74% of employees have security clearances (25% Secret and 47% at Top Secret)
  • 93% owned by Carlyle
  • 55% of business is Defense
  • 21% of business is Intelligence
  • 24% of business is Civil

The ways in which Booz-Allen describes their business, their competitive advantage and their challenges are also worth a read.  They also highlight key emerging areas where they plan to invest and explicitly call out Cloud Computing, Advanced Analytics and the Financial Sector as focus areas.

Their strategy for growth is as follows:

Our Strategy for Continued Growth

We serve our clients by identifying, analyzing and solving their most complex problems and anticipating developments that will have near- and long-term impacts on their operations. To serve our clients and grow our business, we intend to execute the following strategies:

Expand Our Business Base

We are focused on growing our presence in our addressable markets primarily by expanding our relationships with, and the capabilities we deliver to, our existing clients. We will continue to help our clients recognize more efficient and effective mission execution by deploying our objective insight and market expertise across current and future contract engagements. We believe that significant growth opportunities exist in our markets, and we intend to:

•          Deepen Our Existing Client Relationships.  The complex and evolving nature of the challenges our clients face requires the application of different core competencies and capabilities. Our approach to client service and collaborative culture enables us to effectively cross-sell and deploy multiple services to existing clients. We plan to leverage our comprehensive understanding of our clients’ needs and our track record of successful performance to grow our client relationships and expand the scope of the services we provide to our existing clients.

•          Help Clients Rapidly Respond to Change.  We will continue to help our clients formulate rapid and dynamic responses to the frequent and sometimes sudden changes that they face by leveraging: the scope and scale of our domain expertise, our broad capabilities and our one-firm culture, which allow us to effectively and efficiently allocate our resources and deploy our intellectual capital.

•          Broaden Our Client Base.  We intend to capitalize on our scale, the scope of our domain expertise and core capabilities, and our reputation as a trusted long-term partner to grow our client base. We believe that growing demand for the types of services we provide and our ongoing business initiatives will enable us to leverage our reputation as a trusted partner and industry leader to cultivate new client relationships across all agencies and departments of the U.S. government. We will also continue to build on our current cyber-security related work in the commercial market as permitted under the terms of our non-competition agreement with Spin Co. We will explore new opportunities as those opportunities become available in the commercial market upon termination of those contractual restrictions on July 31, 2011, particularly to the extent that we are able to leverage our core competencies, such as our domain expertise in energy, transportation, health and finance, and our functional capabilities, such as cyber and analytics.

Capitalize on Our Strengths in Emerging Areas

We will continue to leverage our deep domain expertise and broad capabilities to help our clients address emerging issues. Through the early identification of clients’ emerging needs and the development of adaptive capabilities to help address those needs, we have established strong competencies and functional capabilities in numerous areas of potential growth, including:

•          Cyber.  Network-enabled technology now forms the backbone of our economy, infrastructure and national security, and recent national policies and initiatives in this area, including CNCI, are creating new cyber-related opportunities. We have been focused on cyber and predecessor areas, such as information assurance, since 1999. We are currently involved in cyber-related initiatives for our defense, intelligence and civil clients and cyber-security initiatives for commercial clients. We are focused on further developing our cyber capabilities to position our company as a leader across the broad and growing range of areas requiring cyber-related services.

•          Government Efficiency and Procurement.  We are focused on helping the U.S. government achieve operating and budgetary efficiencies driven by the need to control spending while simultaneously pursuing numerous policy initiatives. In addition, recent U.S. government reforms in the procurement area may allow us to leverage our status as a large, objective service provider to win additional assignments to the extent that we are able to address OCI and similar concerns more easily than our competitors.

•          Ongoing Healthcare Transformation.  We expect recent and ongoing developments in the healthcare market, such as the passage of the Affordable Care Act of 2010 and the Health Information Technology for Economic and Clinical Health Act of 2009, to increase demand for our healthcare consulting capabilities. We have been serving healthcare-oriented clients in the U.S. government since the late 1980’s. In 2002, we began a focused expansion of our healthcare consulting business, and the current scale of that business, together with our technology-related capabilities, provide us with a strong platform from which to address our clients’ increased focus on the interoperability of healthcare IT platforms, healthcare policy, and payment and caregiver reforms.

•          Systems Engineering & Integration.  Our clients are increasingly utilizing SE&I services to help them manage every phase of the development and integration of increasingly sophisticated information technology, communications and mission systems — ranging from satellite and space systems to air traffic control and naval systems. Many SE&I engagements require the application of requisite competencies across the entire range of agencies or departments involved in a particular program. Through the application of our matrix, we have developed deep cross-market knowledge and a combination of engineering, acquisition, management and leadership expertise. We plan to leverage this knowledge and expertise to bid on large-scale SE&I contracts.

Continue to Innovate

We will continue to invest significant resources in our efforts to identify near-term developments and long-term trends that may present significant challenges or opportunities for our clients. Our single profit center and one-firm culture afford us the flexibility to devote company-wide resources and key intellectual capital to developing the functional capabilities and expertise needed to address those issues. We have regularly allocated significant resources to these business development efforts and have successfully transitioned several such initiatives into meaningful contributors to our business, including:

•          our assurance and resilience services area, which generated approximately $450 million of revenue in fiscal 2010 and which began in 1999 with our efforts to anticipate the challenges posed to federal agencies by IT proliferation; and

•          our healthcare consulting services area, which generated approximately $280 million of revenue in fiscal 2010 and began in the late 1980’s with IT work for the Department of Health and Human Services, and expanded rapidly in 2002 as the result of an internal analysis of potential long-term trends which could affect federal health agencies.

We continue to invest in many initiatives at various stages of development. Three such initiatives are:

Cloud Computing.  Cloud computing is Internet-based computing whereby shared resources, software and information are provided to computers and other devices on-demand without requiring new user infrastructure. The U.S. government has adopted cloud computing as its preferred information technology environment. Several pilot programs related to the U.S. government’s transition to cloud computing are already in progress across its agencies, and cyber-initiatives designed to help ensure the integrity and security of cloud computing environments will be essential to the success of this transition.

Advanced Analytics. Through our advanced analytics capability, we utilize advanced mathematical and other analytical tools to examine the way in which specific issues relate to data on past, present and projected future actions. Advanced Analytics are critical to our clients’ efforts to translate the enormous volumes of data flowing from our nation’s investments in information, communications and technology into insight, foresight and decision-making capacity.

Financial Sector.  Specialized services are needed to help modernize payment processes, implement new technology to assist financial regulators, and reform and redefine the role and organization of agencies such as the Department of the Treasury, the SEC, the Federal Reserve and the Commodity Futures Trading Commission. In addition, financial services companies in the commercial market have extensive electronic networks and electronic payment processing that require the application of sophisticated cyber-security to deter and defend against cyber-criminals and other actors intent on compromising those systems.


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